Practice Tests and Exams

Question 1: Which of the following would it be if an insurance producer were to give an inexpensive calendar to everyone who bought a policy the previous year?

Correct Answer: A. Advertising and promotion.

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Question 2: Which of the following situations require NO examination to obtain an insurance producer license?

Correct Answer: C. Someone who is applying to reinstate a lapsed insurance producer license within 12 months of its lapse.

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Question 3: Which of the following are requirements of all group accident and health insurance policies?

Correct Answer: D. All of the above.

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Question 4: Which of the following is a requirement when selling Medicare Supplement Insurance plans?

Correct Answer: D. All of the above.

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Question 5: The Insurance Director does NOT have which of the following powers?

Correct Answer: C. Sentence insurance produces to prison or jail terms.

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Question 6: Mr. Auddie Murphy is a licensed insurance producer. Mr. Murphy’s reserve unit is being called up for an extended period of active duty. Which of the following requirements does NOT apply to Mr. Murphy’s situation?

Correct Answer: D. He cannot appoint another qualified producer to service his customers while he is in the military.

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Question 7: Which of the following acts does NOT require an insurance producer license?

Correct Answer: C. Doing strictly clerical work in an insurance office for an hourly wage.

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Question 8: For which of the following can a person be charged with a Class B Misdemeanor?

Correct Answer: D. Rebating.

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Question 9: Which of the following rules do NOT apply to Health Maintenance Organizations (HMO’s)?

Correct Answer: D. An HMO plan can be terminated due to the covered member has incurred bad health.

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Question 10: Insurance commissions CANNOT be paid to which of the following?

Correct Answer: C. A unlicensed office assistant for clerical work.

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Question 11: Who can apply for a Temporary Insurance Producer license?

Correct Answer: A. An insurance company for an individual who is in the process of fulfilling the pre-license education requirements.

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Question 12: Which of the following situations requires a Premium Finance Company license?

Correct Answer: A. Allowing more than 10% of all of an insurance producer’s accounts receivable to go over 90 days.

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Question 13: No examination, pre-license education, continuing education or bond requirement applies to which type of license?

Correct Answer: C. Limited Lines Producer license.

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Question 14: Which of the following is NOT required of Long-Term Care Insurance plans?

Correct Answer: D. There are no additional requirements to sell Long-Term Care Insurance plans other than having an accident/health insurance producer license.

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Question 15: Which of the following is NOT a penalty for selling insurance without the appropriate insurance producer license?

Correct Answer: A. A Class B Misdemeanor for acting as an insurance producer without an license.

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Question 16: An advertisement of an accident/health insurance policy can state which of the following?

Correct Answer: B. The true identity of the insurance company.

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Question 17: Which of the following does NOT require an insurance producer license?

Correct Answer: D. An insurance producer’s salaried office assistant that assists the producer only with administrative duties.

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Question 18: Which of the following describes “controlled business”?

Correct Answer: A. Selling insurance to yourself, your own spouse, your own business, or your employer’s business.

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Question 19: Mr. Ryan James requires a special, high face amount life insurance policy. After diligently searching for an insurance company to write the policy, his insurance producer has been able to find only one insurance company that will issue the policy. The insurance company is NOT admitted in the state were the sale is to occur. Which of the following requirements apply?

Correct Answer: A. The policy must be sold through a Surplus Lines Producer.

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Question 20: Which would it be if an insurance producer were to give an insurance customer back a 10% discount on the premium out of the insurance producer’s commissions?

Correct Answer: B. Rebating.

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Question 21: Which of the following describes a foreign insurance company?

Correct Answer: D. An insurance company operating in a state other than the state were it obtained its original charter.

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Question 22: Which of the following is an unfair method of competition for which an insurance producer can be ordered to cease and desist and fined NOT more than a $5,000?

Correct Answer: A. Misrepresenting the financial status of an insurance company.

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Question 1: Which of the following situations require an insurance producer license, but NO examination to obtain it?

Correct Answer: C. A non-resident producer or a producer moving to Illinois from another state.

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Question 2: Which of the following describes brokering?

Correct Answer: A. Selling insurance issued by a company for which the producer is NOT a regular representative and does not have an agency contract.

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Question 3: Which of the following statements is true?

Correct Answer: D. The State Insurance Director can issue subpoenas.

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Question 4: Which of the following is NOT a form of illegal activity?

Correct Answer: D. Giving small gifts to people who have purchased policies in the past as a token of appreciation.

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Question 5: Which of the following statements about premiums, commissions, service fees and late charges is true?

Correct Answer: C. An Insurance Producer can charge a late charge of 1-1/2% per month on an unpaid premium balance within the first 90 days.

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Question 6: How is the fee for an Insurance Producer license paid?

Correct Answer: A. Two years paid by the producer to the Illinois Department of Insurance.

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Question 7: What is the penalty for NOT carrying Workers Compensation Insurance?

Correct Answer: B. Employer loses all Common Law defenses.

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Question 8: Which of the following is a penalty for acting WITHOUT the proper insurance license?

Correct Answer: B. Class A Misdemeanor for soliciting, negotiating, or selling insurance without proper licensing.

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Question 9: Which of the following statements concerning the Workers Compensation Assigned Risk Pool is true?

Correct Answer: C. Its purpose is to assure the availability of Workers Compensation insurance to all employers

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Question 10: Which of the following statements concerning the Automobile Insurance Plan is NOT true?

Correct Answer: D. Participation in the Automobile Insurance Plan is voluntary on behalf of the insurance companies.

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Question 11: Which of the following describes a Business Entity?

Correct Answer: A. An insurance agency.

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Question 12: When is a license terminated?

Correct Answer: A. When the license renewal fee has not been paid.

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Question 13: Which of the following would qualify as a form of misappropriation of premium monies?

Correct Answer: D. Not keeping records of the premium money.

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Question 14: A Premium Fund Trust Account CANNOT be maintained in which of the following types of accounts?

Correct Answer: D. A stock brokerage account.

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Question 15: Which of the following statements concerning an application for an Insurance Producer License is true?

Correct Answer: B. The individual applies and pays a two year fee to the Illinois Department of Insurance.

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Question 16: When must the insurance company reduce premium rates?

Correct Answer: D. An insured over age 55 who has successfully completed an approved safe driving course.

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Question 17: Which of the following situations require NO license (which of the following is an exemption from licensing)?

Correct Answer: D. Actuaries.

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Question 18: Which of the following is NOT a quality needed to obtain an Insurance Producer license?

Correct Answer: A. 21 years of age.

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Question 19: When an Insurance Producer collects premium monies, to whom is the producer responsible?

Correct Answer: D. To the insurance company.

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Question 20: What must an insurance company do to have a Temporary Insurance Producer license qualified training program?

Correct Answer: B. Have at least 50% of its Temporary Insurance Producers pass the examination and obtain Insurance Producer licenses prior to the expiration of their Temporary Insurance Producer licenses.

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Question 21: Which of the following is NOT a quality needed to be a professional?

Correct Answer: A. High income.

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Question 1: This is question 1

Correct Answer: A. Option 1

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Question 2: This is question 2

Correct Answer: B. Option 2

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Question 3: This is question 3

Correct Answer: C. Option 3

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Question 1: Which of the following statements is CORRECT?

Correct Answer: D. As their earnings increase through the years, people tend to increase their spending rather than saving.

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Question 2: In how many states is continuing education a requirement for maintaining an insurance license?

Correct Answer: D. All 50 states.

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Question 3: As a field underwriter, what information is a life insurance producer NOT responsible for gathering about a prospect?

Correct Answer: B. Ethnic background.

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Question 4: About what percentage of all families with children are one-parent families headed by women?

Correct Answer: D. 25%

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Question 5: What is the additional amount of income a family receives for a year or so after an income earner’s death called?

Correct Answer: A. Adjustment period income.

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Question 6: A plan to provide for a family’s financial needs if an income earner should die is guaranteed to be completed immediately at the income earner’s death if the funds are put into which of the following?

Correct Answer: C. Life insurance.

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Question 7: For which of the following reasons should a person NOT purchase an annuity?

Correct Answer: B. To provide funds for survivors of an insured who has died prematurely.

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Question 8: What do public pensions include?

Correct Answer: A. Veteran’s benefits

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Question 9: Marie, a public grade school teacher, wants to use a tax-sheltered annuity to provide money for her retirement. Which of the following statements pertaining to her annuity is FALSE?

Correct Answer: D. The contributions she will make to her tax-sheltered annuity will come from her after-tax earnings.

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Question 10: What is the key to conducting a successful presentation interview?

Correct Answer: D. Memorizing and practicing what you are going to say and do during the interview.

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Question 11: Bob is a long-time friend who was just promoted in an engineering firm. He is overweight and takes blood pressure medication, but his wife told you the doctor feels his blood pressure will return to normal after he loses weight. Which of the following should you do when considering Bob as a prospect?

Correct Answer: C. Call as soon as possible to set up an appointment with Bob and his wife to discuss their life insurance.

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Question 12: What is the purpose of the approach?

Correct Answer: B. To acquire the prospect’s agreement to an interview.

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Question 13: The prospect says, “What’s this about, insurance?” This question is which type of common objection?

Correct Answer: B. What’s the Idea?

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Question 14: Which of the following is NOT something a producer should remember to do before beginning a visual presentation?

Correct Answer: C. Make sure the visual is turned so the producer – not the client – can read it.

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Question 15: Which of the following is a feature to a life insurance policy, as opposed to a benefit?

Correct Answer: A. The policy has a level premium structure.

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Question 16: Which of the following is NOT a major item of information requested on the life insurance application?

Correct Answer: B. Political affiliation

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Question 17: In most jurisdictions, a life insurance policy may be backdated up to how many months?

Correct Answer: D. 6 months

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Question 18: When may a producer give an applicant either a conditional receipt or a binding receipt (as the case requires)?

Correct Answer: C. If the first premium is paid at the time of the application.

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Question 19: Which of the following about a universal life policy is NOT true?

Correct Answer: B. Policy may not allow partial withdrawals.

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Question 20: A client desires an annuity in which the values fluctuate according to the investment performance of the underlying investment portfolio. What is this type of annuity called?

Correct Answer: A. A variable annuity.

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Question 21: What are residual disability benefits related to?

Correct Answer: B. The insured’s earnings lost due to disability.

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Question 22: Which of the following usually goes into effect automatically if the policyowner fails to exercise any other nonforfeiture option?

Correct Answer: B. Extended term option.

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Question 23: A beneficiary of a life insurance policy is receiving an income that is comprised of both the policy principal and interest earnings, to be paid monthly for 15 years. Which settlement option has been used in this situation?

Correct Answer: B. Fixed period option.

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Question 24: In the final analysis, who is responsible for a producer’s business management activities?

Correct Answer: D. The producer.

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Question 25: How often should a producer plan to review a client’s insurance policies in light of his or her needs and future plans?

Correct Answer: B. At least once a year.

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Question 1: An insured buy-sell agreement can do all of the following while the sole proprietor is still alive EXCEPT?

Correct Answer: D. Provide immediate cash for the owner’s heirs.

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Question 2: Current assets minus current liabilities equals:

Correct Answer: C. Working capital.

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Question 3: In sole proprietorship cases, the decision maker the agent should seek out for an interview will be which of the following?

Correct Answer: A. The owner of the business.

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Question 4: Which of the following is NOT a characteristic of partnerships?

Correct Answer: C. Treated as a separate taxable entity.

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Question 5: Which of the following is NOT a feature of S corporations?

Correct Answer: A. They may have more than one class of stock outstanding.

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Question 6: Which of the following is the primary tax advantage of a Section 303 stock redemption?

Correct Answer: C. It allows a stock redemption to be treated as a capital transaction rather than as a dividend.

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Question 7: Which of the following statements about the payment of insurance proceeds in a partnership cross-purchase plan is TRUE?

Correct Answer: D. The proceeds are received income tax-free by the beneficiary.

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Question 8: In a group insurance plan, the initial period during which new employees are not entitled to coverage is called the:

Correct Answer: B. Probationary period.

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Question 9: Which of the following is usually the most logical market for closely held stock?

Correct Answer: B. Other owners of the closely held stock.

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Question 10: A limited liability company (LLC) is a hybrid entity that combines some of the characteristics of what other forms of business?

Correct Answer: C. Partnership and corporation.

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Question 11: If an employer pays an employee a bonus to assist the employee in making split dollar premium payments, what is true in regard to the bonus?

Correct Answer: A. Deductible to the employer as a business expense if the employee’s total compensation is reasonable.

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Question 12: Under the restricted access type of executive bonus plan, who generally owns the life insurance policy?

Correct Answer: A. A secular trust.

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Question 13: What is a financial statement that shows what a company owns and what it owes on a particular day called?

Correct Answer: A. Balance sheet.

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Question 14: A rabbi trust is a device that is used to what?

Correct Answer: B. Ensure that contributions to an employee’s deferred compensation are not accessible by management.

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Question 15: All the following are typically characteristics of group plans EXCEPT?

Correct Answer: A. Separate policies for each member of the group.

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Question 16: Which of the following is a fixed asset?

Correct Answer: B. Land.

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Question 17: Nonqualified plans, such as deferred compensation plans, are subject to which of the following ERISA requirements?

Correct Answer: D. Reporting and disclosure.

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Question 18: Which of the following is NOT a characteristic of sole proprietorships?

Correct Answer: C. Earnings are taxed twice.

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Question 19: Which of the following is NOT typically an advantage of a limited liability company (LLC)?

Correct Answer: B. Inexpensive to form.

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Question 20: The major difference between an S corporation and a C corporation is what?

Correct Answer: A. How company earnings are taxed.

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Question 21: The major purpose of a split dollar plan is to what?

Correct Answer: A. Provide additional life insurance to a valued employee.

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Question 22: Under the Affordable Care Act (ACA), children or dependents can be covered under an insured’s group health insurance policy until they reach what age?

Correct Answer: D. 26

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Question 23: The longer the waiting period in a group disability policy, the_______ the premiums?

Correct Answer: B. Lower.

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Question 24: Generally speaking, which statement applies to premiums paid for a policy used to fund a buy-sell agreement in a sole proprietorship?

Correct Answer: A. Cannot be deducted as a business expense.

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Question 25: Which of the following applies to the death of a majority stockholder in a business?

Correct Answer: C. Can be just as threatening to the business as the death of a sole proprietor or partner is to his or her business.

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Question 1: Where does Medicare Part B pay for a physician’s services?

Correct Answer: D. At the doctor’s office, in a hospital, or in the patient’s home.

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Question 2: The Medigap “open enrollment” or “guaranteed issue” period for obtaining Medigap insurance lasts for how many months after an individual is both age 65 or older and has enrolled in Medicare part B?

Correct Answer: A. 6 months.

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Question 3: Which of the following statements is true regarding the sale of duplicate Medigap coverage?

Correct Answer: C. It is prohibited.

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Question 4: What must the patient first satisfy before Medicare Part B will pay for covered charges?

Correct Answer: B. The part B annual deductible.

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Question 5: Which of the following may be covered under either Medicare Part A or Part B?

Correct Answer: D. Home health care.

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Question 6: Where may Medigap policies be purchased?

Correct Answer: A. Private health insurers and health care organizations.

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Question 7: Which of the following is NOT eligible for Medicare?

Correct Answer: C. Anyone age 64 or younger not disabled and not with ESRD.

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Question 8: Which of the following inpatient hospital services is NOT covered by Medicare Part A?

Correct Answer: A. Private duty nurses.

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Question 9: Which of the following types of care is covered by Medicare Part A?

Correct Answer: C. Skilled nursing facility care.

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Question 10: What is a general requirement to be eligible for Medicaid?

Correct Answer: D. A person must have an income that is low enough to qualify for public assistance.

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Question 11: Which of the following is NOT generally covered by Medicare Part B?

Correct Answer: B. Inpatient hospital care.

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Question 12: When will Medicare sometimes cover care provided by non-certified health providers?

Correct Answer: D. If the beneficiary requires urgently-needed medically-necessary emergency care in a foreign country.

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Question 13: For how many days of inpatient hospital care will Medicare Part A pay at least part of the cost if a patient has not yet used any lifetime reserve days?

Correct Answer: C. 150 days

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Question 14: Medicare Part B will generally pay for which of the following?

Correct Answer: D. Medically-necessary house calls.

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Question 15: Medicare Part B is financed in part by which of the following?

Correct Answer: B. Enrollee monthly premiums.

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Question 16: The patient must pay the full cost of SNF, (skilled nursing facility), care after how many days of such care?

Correct Answer: B. 100

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Question 17: What is Medicare Part A generally financed by?

Correct Answer: C. A payroll tax.

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Question 18: Which of the following is NOT included in the core benefits of Medigap Plan A?

Correct Answer: C. Part A deductible.

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Question 19: What is the number of days of skilled nursing facility (SNF) care for which Medicare Part A will pay the full cost?

Correct Answer: B. 20 days

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Question 20: Who is considered the “primary payer” for the covered health care costs of an individual over age 65 who continues to maintain his employer-sponsored group health coverage?

Correct Answer: C. The group health insurer.

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Question 21: What does the “respite care” benefit under the hospice care provision in Medicare Part A cover?

Correct Answer: A. Temporary care in a hospice for a terminally ill patient who is normally cared for at home.

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Question 22: Which of the following Medicare programs usually requires enrollees to pay a monthly premium?

Correct Answer: B. Medicare Part B.

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Question 23: If both spouses are covered by Medicare, how many Medicare consumer cards do they need?

Correct Answer: C. 2

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Question 24: What is the coinsurance percentage that a beneficiary generally must pay under Medicare Part B?

Correct Answer: C. 20%

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Question 25: Which of the following basic types of health care does Medicare Part A NOT pay for?

Correct Answer: A. Surgeons’ fees.

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Question 1: A person who wants to contest a decision made by a lower federal court must first appeal to which court?

Correct Answer: B. Circuit court.

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Question 2: Which one of the following answer choices lists the hierarchy of a typical state court system?

Correct Answer: D. Highest appellate court, intermediate appellate court, court of original jurisdiction.

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Question 3: Miguel suffers a loss because of Ying’s actions. However, because Miguel fails to take proper care following this incident to protect himself from further damage, Ying is NOT held liable for any additional damage. This ruling is based on the fact that Miguel is responsible for which one of the following?

Correct Answer: A. Avoidable consequences.

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Question 4: What type of legal relationship arises when one-person transfers possession of personal property to another person, with the agreement that the property will be returned to the first party?

Correct Answer: A. Bailment.

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Question 5: Name the federal statute that exempts the insurance industry from the Sherman Anti-Trust Act and makes insurance subject to state regulation?

Correct Answer: D. McCarran-Ferguson Act.

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Question 6: Which one of the following is NOT one of the elements required to establish a charge of negligence?

Correct Answer: C. Deliberate attempt to cause harm.

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Question 7: Which of the following is NOT a requirement for a valid contract?

Correct Answer: D. The contract must be in writing.

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Question 8: Daryl is held responsible for damages resulting from the negligent operation of an auto he owns by a member of his family. Which of the following examples are correct?

Correct Answer: A. The family purpose doctrine.

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Question 9: What are the names of the two parties to an agency relationship?

Correct Answer: D. Agent and principal.

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Question 10: Under a no-fault law, an accident victim’s damages are paid for by which of the following?

Correct Answer: C. The victim’s own insurance company.

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Question 11: As a condition of issuing a commercial property policy, an insurance company and a business owner agree that a security guard will always be on duty while the business is closed. The parties further agree that this condition will be met throughout the term of the policy and will be included in the written policy. This agreement is an example of which of the following?

Correct Answer: A. A promissory warranty.

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Question 12: A legal agreement between two competent parties that promises a certain performance in exchange for a certain consideration is which of the following?

Correct Answer: B. A contract.

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Question 13: Which of the following statements describes a contract of indemnity?

Correct Answer: B. After a loss, the insured will be restored to the approximate financial condition he or she was in before the loss.

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Question 14: Which of the following is NOT one of the elements of fraud?

Correct Answer: B. The lie involves withholding, rather than misstating, a material fact.

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Question 15: What the primary difference between fraud and misrepresentation?

Correct Answer: B. Fraud is always intentional; misrepresentation may be either unintentional or intentional.

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Question 16: A claim handler tells an insured that a claim will be paid. When the insurance company later tries to deny this claim, it is prevented from doing so because of the claim handler’s statement. This is an example of which of the following?

Correct Answer: B. Estoppel.

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Question 17: When Sam Files a claim for a vandalism loss to his business, he fails to mention that the store’s security guard had been asleep at the time of loss. Sam’s claim could be invalid based on which of the following?

Correct Answer: C. Concealment.

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Question 18: A first party bad faith lawsuit is filed by which of the following?

Correct Answer: B. The insured against his or her insurer for bad faith handling of a first party claim.

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Question 19: A third-party bad faith lawsuit is filed by which of the following?

Correct Answer: A. The insured against her insurer for bad faith handling in the defense or settlement of a third-party claim.

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Question 20: Which one of the following is NOT included in the category of special damages?

Correct Answer: D. Pain and suffering.

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Question 21: A defendant files a motion to prevent a case from going to trail based on her belief that there is no legal remedy provided for the complaint. This type of motion is called which of the following?

Correct Answer: D. A motion for summary judgment.

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Question 22: A statute that provides that certain types of suits must be brought within a specified time of the occurrence to be valid under the law is which of the following?

Correct Answer: C. A statute of limitations.

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Question 23: Which of the following lists all the criteria required for evidence to be admissible in court?

Correct Answer: B. Material, relevant, competent.

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Question 24: An attorney presents a diagram of an auto accident scene as evidence. This is an example of what type of evidence.

Correct Answer: A. Physical/demonstrative.

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Question 25: In an appeal, lawyers for both parties file written statements that present legal arguments on the issue on appeal. These statements are called which of the following?

Correct Answer: A. Briefs.

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Question 1: Which of the following is TRUE about medical expense reimbursement from a flexible spending account?

Correct Answer: C. They cannot be claimed an income tax deduction on the employee’s tax returns.

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Question 2: Which of the following is NOT subject to nondiscrimination rules?

Correct Answer: D. Group health plans underwritten by an insurance company.

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Question 3: According to law, the amount of medical expenses that may be paid on a before-tax basis through a flexible spending account is which of the following?

Correct Answer: A. Unlimited.

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Question 4: Which of the following is NOT a true statement with regard to HMOs?

Correct Answer: B. It’s always wise to replace an existing traditional health plan with an HMO.

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Question 5: Which of the following is TRUE about the corridor deductible in a group health plan?

Correct Answer: D. It is paid after basic medical expense coverage is exhausted and before supplemental major medical coverage begins.

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Question 6: Which of the following types of group coverage generally preclude individual selection?

Correct Answer: B. Group life, health, and disability.

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Question 7: Supplemental major medical coverage in a group health plan is designed to do which of the following?

Correct Answer: C. Augment basic medical expenses for coverage that has run out.

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Question 8: Which of the following is NOT a benefit of a Section 125 plan?

Correct Answer: B. An increase in Social Security benefits for all employees.

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Question 9: Which of the following describes the main difference between an HMO and a PPO?

Correct Answer: B. How the fees are paid.

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Question 10: Second surgical opinions, pre-admission testing and home or hospice health care are examples of which of the following?

Correct Answer: A. Cost containment benefits.

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Question 11: Which of the following groups would be eligible to take a tax deduction premiums paid to provide group life or health coverage on the groups’ members?

Correct Answer: A. Major shareholder-employees of C corporations.

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Question 12: Which of the following do group life plans offer?

Correct Answer: B. Spouse and dependent coverage that is less than that of the plan participant.

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Question 13: Who among the following would NOT be eligible for COBRA coverage?

Correct Answer: B. Naomi, who is entering the workforce for the first time at age 35.

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Question 14: Which of the following is TRUE about group term life premiums for groups of 50 or more?

Correct Answer: B. They are recalculated annually.

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Question 15: When can an insurance company change the premiums for a group long-term care policy that is issued on a guaranteed renewable basis?

Correct Answer: B. Only when the change applies to all insureds of the same class.

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Question 16: COBRA extended coverage requirements applies to which of the following?

Correct Answer: A. Group health and dental plans.

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Question 17: Which of the following is TRUE about group long-term care policies?

Correct Answer: D. They are usually available at younger ages than individual policies.

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Question 18: What does a benefit trigger in a group long-term care policy refer to?

Correct Answer: B. The status of the insured’s condition that will cause benefits to begin under the policy.

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Question 19: Which of the following is TRUE about the government program Medicaid?

Correct Answer: C. It pays for long-term care in nursing homes, but only if the individual meets certain income and asset standards.

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Question 20: In group plans, the cost of benefits exceeding $50,000 is taxable income to the plan participant for which of the following?

Correct Answer: C. For group term life coverage only.

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Question 21: Salary continuation plans generally require all of the following EXCEPT?

Correct Answer: D. The employee must be disabled for a specific period of time for benefits to begin.

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Question 22: In a group long-term care policy, what do the nonforfeiture values refer to?

Correct Answer: D. The return of premium benefit or reduced paid-up benefit.

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Question 23: Which of the following require 100% participation by all eligible persons?

Correct Answer: D. Noncontributory group plans.

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Question 24: Which of the following is NOT an advantage offered by Section 125 plans?

Correct Answer: B. A tax deduction for medical expenses paid out-of-pocket.

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Question 25: Which of the following federal laws specifically deals with the status of pregnancy under group health insurance coverages?

Correct Answer: A. The Civil Rights Act.

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Question 1: During the payout period, how are the annuitant’s payments from the company taxed?

Correct Answer: B. As income on the part of the payment that is not a return of the annuitant’s cost.

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Question 2: Daniel and Karen are the annuitants of a joint-and-survivor annuity. What happens when either Daniel or Karen dies?

Correct Answer: D. The surviving annuitant will continue to receive payments for life.

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Question 3: For a straight life annuity in the payout phase with no survivor benefit, how much is included in the owner-annuitant’s gross estate at death?

Correct Answer: A. Zero.

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Question 4: Which of the following statements about annuities is true?

Correct Answer: A. Earnings within an annuity have a tax advantage over earnings within a bank CD.

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Question 5: What is an annuity purchased with a single premium to begin providing income one payment interval in the future called?

Correct Answer: A. Immediate annuity.

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Question 6: For a joint-and-survivor annuity for two unmarried people purchased entirely with the funds of the survivor, how much is included in the gross estate of the first to die?

Correct Answer: A. Zero.

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Question 7: To compute the annuity exclusion ratio for income tax purposes, divide the investment in the contract by which of the following?

Correct Answer: C. The expected return.

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Question 8: Which of the following would an annuity NOT offer possible tax advantages to?

Correct Answer: D. An investor who wanted to shelter her commission earnings from income tax.

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Question 9: Which of the following is true regarding premiums paid for a personal annuity contract?

Correct Answer: A. They are nondeductible.

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Question 10: Which of the following instances would the 10% penalty tax on premature withdrawals apply to a contract purchased within the last 10 years?

Correct Answer: D. A withdrawal is made so that the contract owner, healthy and age 30, can put a down payment on a home.

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Question 11: The rate of earnings on a variable annuity is which of the following?

Correct Answer: C. Tied to the performance of securities in the insurer’s separate account.

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Question 12: An individual who wants the potential for hedging against inflation for money used to purchase an annuity should choose which type of annuity?

Correct Answer: B. A variable annuity.

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Question 13: Which one of the following is NOT a characteristic of variable annuities?

Correct Answer: A. Guaranteed interest rate.

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Question 14: Variable annuities are insurance products and are regulated by the state insurance departments. They are also subject to regulation as which of the following?

Correct Answer: D. Securities.

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Question 15: The nonrecurring sales charge that occurs in the first year of some deferred annuities is called what?

Correct Answer: C. A front-end load.

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Question 16: The “flip side” of an annuity is sometimes called what?

Correct Answer: A. Life insurance.

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Question 17: In most cases, the annuitant’s cost in the annuity contract is which of the following?

Correct Answer: B. It is not taxed.

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Question 18: Which of the following is a purpose of the annuity?

Correct Answer: C. The distribution of a lifetime income.

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Question 19: Which of the following enjoys tax deferral of the earnings on annuity cash values?

Correct Answer: B. Individuals.

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Question 20: Which of the following payout options guarantees that the annuitant will have an income regardless of how long he lives?

Correct Answer: A. Life annuity payments.

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Question 21: Which of the following is least popular today?

Correct Answer: B. Level-premium retirement annuity.

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Question 22: Are Social Security retirement benefits ever taxed?

Correct Answer: C. They are partially taxed for recipients over certain levels of income.

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Question 23: The type of annuity that guarantees a minimum rate of return is which of the following?

Correct Answer: D. The fixed annuity.

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Question 24: Why are individuals who have received early retirement incentive packages often good annuity prospects?

Correct Answer: C. They need to plan ahead.

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Question 25: Which of the following is true?

Correct Answer: C. Annuities do not go through probate when the owner dies.

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Question 1: In the mind of the client, which of the following is NOT essential to the decision to purchase a life insurance policy?

Correct Answer: D. The agent must disclose his or her commission.

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Question 2: Which of the following do consumers consider to be the most important factor in their relationships with a financial adviser?

Correct Answer: B. The ability to trust the adviser and know that he or she is ethical.

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Question 3: When might a life insurance agent be justified in taking an unethical action?

Correct Answer: D. Under no circumstances.

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Question 4: Long-term success in the life insurance business depends most on which of the following?

Correct Answer: A. Maintaining high standards of ethical behavior.

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Question 5: What is the use of misrepresentation to replace policies issued by an insurer other than the one an agent represents called?

Correct Answer: A. Twisting.

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Question 6: Which of the following is NOT an argument against commission disclosure?

Correct Answer: D. Consumers keep asking for commission disclosure.

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Question 7: Which one of the following is NOT an advantage of using standardized disclosure materials?

Correct Answer: C. It increases the agent’s potential liability for errors and omissions.

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Question 8: Which of the following is true if an agent makes a misrepresentation unintentionally?

Correct Answer: C. The agent has committed an illegal act that may be subject to severe penalties.

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Question 9: In policy illustrations, how would the term “current experience” be defined?

Correct Answer: C. Differently by different companies.

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Question 10: What does the phrase “The Illustration Is The Policy” mean?

Correct Answer: B. Consumers tend to rely on non-guaranteed values shown in a policy illustration as if they were guaranteed.

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Question 11: Looking the other way when you see someone in your agency doing something illegal is considered to be which of the following?

Correct Answer: A. Unethical, and possibly illegal.

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Question 12: The NAIC Life Insurance Illustrations Model Regulation requires policy illustrations to be in what form?

Correct Answer: D. All the above.

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Question 13: Which of the following statements concerning policy illustrations is NOT true?

Correct Answer: A. Illustration actuary must submit annual certifications only to the state insurance commissioner.

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Question 14: Of the following parties, which one holds a stake in the continuing success of the life insurance industry?

Correct Answer: D. Policyowners, beneficiaries, stockholders of stock companies, agents, general agents and managers, company officers and employees regulators, trade associations, and the general public.

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Question 15: Which of the following applies to “caveat emptor”, the principle of commerce that states “let the buyer beware"?

Correct Answer: A. It should be replaced in life insurance sales with “cognosceat emptor” – let the buyer know.

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Question 16: Basing the sale of a life insurance policy on the values shown in a policy illustration is defined as what?

Correct Answer: B. Ledger selling.

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Question 17: Of the following categories of factors that affect life insurance policy performance, over which do companies have the most control?

Correct Answer: A. Expenses.

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Question 18: Which of the following is NOT consistent with a needs-based sales approach?

Correct Answer: D. Quickly sizing up new prospects in terms of how much first-year premium they may be persuaded to pay for life insurance.

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Question 19: Agents who are not licensed attorneys are engaging in the unauthorized practice of law if they do which of the following?

Correct Answer: C. Apply general legal concepts to a client’s specific situation.

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Question 20: What is the entity on whose behalf an agent acts known as?

Correct Answer: D. Principal.

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Question 21: Who derives the most immediate economic benefit from a life insurance sale?

Correct Answer: C. The agent, because he or she earns a commission.

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Question 22: Which statement is correct?

Correct Answer: A. Ignorance of the law is no excuse for violating the law.

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Question 23: Agent John sells a policy without telling the client that the plan is life insurance. What is this considered?

Correct Answer: C. Both illegal and unethical.

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Question 24: How should life insurance sales representatives refer to themselves?

Correct Answer: C. As agents.

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Question 25: Which of the following is true with regard to predictions of future life insurance policy performance?

Correct Answer: A. It tends to be inaccurate because even if investment, expense, and mortality experience could be known, actual performance would vary because of the human factor.

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Question 1: John plans to invest a lump sum of $10,000 at 5% for 10 years. To find out how much money he will have at the end of this period, John would use which of the following financial calculation techniques?

Correct Answer: A. Compounding.

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Question 2: Which of the following statements is TRUE regarding lump-sum distributions from employer qualified plans?

Correct Answer: B. Current tax consequences can be avoided if the entire amount is transferred directly to a rollover IRA.

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Question 3: Which of the following statements is TRUE regarding the taxation of Social Security benefits?

Correct Answer: C. A portion of Social Security benefits is taxable if a recipient’s provisional income exceeds a certain amount.

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Question 4: The current yield in a bond is?

Correct Answer: C. the annual interest paid divided by the current price of the bond.

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Question 5: To find a client’s net worth, what would the financial planner look at?

Correct Answer: B. A balance sheet.

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Question 6: Which of the following statements about qualified defined benefit retirement plans is TRUE?

Correct Answer: B. The amount of a participant’s retirement benefit is determined by a definite formula.

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Question 7: Wilma is earning 10% on a corporate bond. She is in a 28% tax bracket. What is her after-tax yield?

Correct Answer: D. 7.2%

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Question 8: Intestacy refers to

Correct Answer: B. the state of dying without having made a valid will.

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Question 9: The implementation phase of the financial planning process might include all the following EXCEPT

Correct Answer: C. setting realistic financial objectives.

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Question 10: The final step in the financial planning process is

Correct Answer: A. updating and monitoring.

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Question 11: Which of these statements about traditional IRAs is true?

Correct Answer: A. Contributions may be tax deductible.

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Question 12: For individuals, interest is tax deductible on which of the following types of debt?

Correct Answer: D. Mortgage on the primary residence.

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Question 13: The recommended amount for a personal emergency fund is

Correct Answer: B. 3 to 12 months’ living expenses.

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Question 14: What is term life insurance characterized by?

Correct Answer: C. Coverage without cash value.

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Question 15: The type of qualified retirement plan that is available only to employees of 501(c)(3) organizations and public school systems is

Correct Answer: A. a tax sheltered annuity (TSA).

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Question 16: The provision in a medical expense policy that requires the insured to share in a percentage of incurred expenses is called

Correct Answer: C. Coinsurance.

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Question 17: At full retirement age, a worker’s Social Security benefit is what percentage of his primary insurance amount (PIA)?

Correct Answer: D. 100%

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Question 18: Which of the follow is a process solution (as opposed to a product solution) in financial planning?

Correct Answer: D. Buy-sell agreement.

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Question 19: Finding the PV of a future sum, given specific rate of return and period of years, is called

Correct Answer: D. Discounting.

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Question 20: Someone who invests in real estate or fine art runs the risk that the investment cannot be converted to cash quickly at current market value. What is this risk called?

Correct Answer: C. liquidity risk.

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Question 21: Which of following is a key tax advantage of life insurance?

Correct Answer: A. Income tax exclusion of death benefits.

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Question 22: All the following are plan qualification requirements for retirement plans EXCEPT

Correct Answer: C. employees must be required to make contributions to the plan.

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Question 23: When can a single homeowner take the $250,000 exclusion of gain on the sale of a principal residence?

Correct Answer: D. No more than every two years.

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Question 24: For persons born in 1960 or after, the retirement age under Social Security is

Correct Answer: B. 67

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Question 25: All the following are generic estate planning EXCEPT

Correct Answer: C. purchasing tax shelters.

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Question 1: Which of the following is the common factor in determining the suitability of a variable life, a variable universal life or a universal life policy for a given individual?

Correct Answer: C. The individual’s need for insurance.

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Question 2: Which of the following is not regarded as a strategy for improving investment performance in a variable contract?

Correct Answer: D. Contributing 100 percent of the premium into the fixed interest subaccount.

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Question 3: The client’s life expectancy on the annuity starting date is 20 years, his investment in the annuity contract is $25,000, and the monthly annuity payment is $265. Under the exclusion ratio, how much of each payment will be income tax-free?

Correct Answer: D. $104 until the investment in the contract is recovered.

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Question 4: Policyowners A owns a conventional whole life policy, policyholder B owns a universal life policy, and policyholder C owns a variable life policy. All other factors being equal, who receives the most favorable tax treatment on the policy?

Correct Answer: D. All receive essentially equal tax treatment.

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Question 5: Withdrawals from a deferred annuity before the annuitant’s age 59 ½ (other than for annuitization or a systematic withdrawal program) will not result in which of the following?

Correct Answer: C. A loss of earnings realized by the deferred annuity up to that moment.

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Question 6: Which of the following is not an asset class that may be included in a variable contract’s asset allocation?

Correct Answer: D. Tax straddles.

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Question 7: With respect to variable universal life insurance, which of the following best describes the difference between Options A and B?

Correct Answer: B. Option A is based on a decreasing term policy and emphasizes cash value growth, while Option B is based on a level term policy and emphasizes death benefit growth.

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Question 8: Which of the following generally faces the greatest market risk?

Correct Answer: D. Aggressive stock account.

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Question 9: Which of the following statements regarding annuities is not correct?

Correct Answer: C. They ideally are suited for meeting short-term financial needs.

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Question 10: A universal life policy does not give the policyowner some degree of flexibility with which of the following?

Correct Answer: C. The underwriting standards.

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Question 11: A client is receiving monthly benefit payments from a variable annuity contract that has a 4 percent AIR. In June, the separate account nets a return of 5 percent, and the July payment amount is $350. In July, which of the following must happen for the August payment amount to remain at $350?

Correct Answer: C. The separate account must net a return greater than 5 percent.

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Question 12: Which of the following statements best describes the income tax treatment afforded annuities?

Correct Answer: B. Deferred annuities enjoy tax-deferred growth.

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Question 13: What is the purpose of a variable contracts assumed interest rate (AIR)?

Correct Answer: C. To attempt to maintain stability by projecting the rate of return which, if realized, will maintain a level benefit.

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Question 14: All other factors being equal, a short-term investment horizon generally suggests which investment option?

Correct Answer: D. A money market account.

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Question 15: Which of the following is true regarding premiums for a variable life policy?

Correct Answer: A. It is usually fixed as to the premium amount.

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Question 16: Variable life insurance and conventional whole life insurance do not share which of the following characteristic?

Correct Answer: B. A guaranteed cash value.

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Question 17: During a variable annuity’s payout period, what would make the amount of each monthly payment vary?

Correct Answer: D. Changes in the annuity unit value.

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Question 18: What is the most reliable source of unbiased information regarding a variable contract?

Correct Answer: D. The insurance sales representatives representations.

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Question 19: Which of the following statements pertaining to universal variable life insurance is not correct?

Correct Answer: B. The insurance company assumes the investment risk.

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Question 20: Which of the following statements is not correct about separate accounts?

Correct Answer: D. They are guaranteed by the insurer.

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Question 21: Which of the following statements regarding modified endowment contracts (MECs) is correct?

Correct Answer: B. To avoid being classified as a MEC, a life insurance policy must satisfy the “7-pay test.”

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Question 22: When determining the suitability of a variable contract for a particular client, what is the first step?

Correct Answer: A. Determine the client’s need for the insurance protection.

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Question 23: A variable annuity has been annuitized and is now paying monthly benefits based on a 5 percent assumed interest rate (AIR). In the past month, the contract’s annuity unit has netted an increased 5 percent in value. What effect will this have on the monthly benefit?

Correct Answer: C. It will increase.

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Question 24: Assume one of your clients is trying to determine how to allocate his premiums among the separate account options of his variable life policy. He is 64 years old with an average-to-low risk tolerance level, and his overriding objective is asset conservation. Which of the following would be the most appropriate recommendation for his premium allocation?

Correct Answer: B. 20 percent growth stock; 60 percent fixed interest; 20 percent bond.

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Question 25: What does the term variable refer to?

Correct Answer: B. A life insurance or annuity contract’s investment performance.

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Question 1: Which of the following make up the estate planning team?

Correct Answer: A. The life producer, the attorney, the accountant, and the trust officer.

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Question 2: Which of the following would NOT be included in a decedent’s gross estate?

Correct Answer: B. Property placed in an irrevocable trust.

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Question 3: How does a property interest owned by a tenant in common pass at death?

Correct Answer: D. It passes according to the deceased’s will.

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Question 4: If an annuity ceases at the death of the annuitant, how much of it is included in the deceased’s gross estate?

Correct Answer: D. Nothing.

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Question 5: What are assets included in the gross estate are generally valued at?

Correct Answer: C. Their fair market value.

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Question 6: What must occur for a property transfer to be considered a valid gift?

Correct Answer: D. The property transfer is complete.

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Question 7: Which of the following statements is TRUE about real estate owned by a decedent?

Correct Answer: A. Real estate owned by a decedent is subject to state death taxes in the state in which it is located.

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Question 8: Property is generally valued either on the date of death or on the alternate valuation date, which is?

Correct Answer: B. Six months after the decedent's date of death.

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Question 9: When is the estate tax return of a deceased generally due?

Correct Answer: C. Nine months after the date of death.

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Question 10: What value is an existing paid-up life insurance policy as the subject of a gift?

Correct Answer: C. Replacement cost.

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Question 11: Generally, which member of the estate planning team is most responsible for initiating the estate planning process and assimilating the date?

Correct Answer: C. The life producer.

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Question 12: Who or what will do it for him if an estate owner fails to specify how his assets are to be disposed of at death?

Correct Answer: D. State intestacy laws.

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Question 13: Always included in one's gross estate is Life Insurance if:

Correct Answer: D. The decedent insured possessed incidents of ownership in the policy.

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Question 14: To avoid probate, which of the following is most likely?

Correct Answer: C. Life insurance proceeds paid to the designated beneficiary.

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Question 15: What does escheat refer to?

Correct Answer: A. The state’s inheritance of property when there are no heirs.

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Question 16: Which one of the following is true, with respect to estate planning, trusts are generally_________ than life insurance settlement options?

Correct Answer: C. More flexible.

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Question 17: Which of the following is NOT an advantage of having a will?

Correct Answer: C. Wills eliminate federal estate taxation on second generation transfers.

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Question 18: The number of annual gift tax exclusions available to a donor is limited by what?

Correct Answer: B. The number of donees.

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Question 19: Split-gifts are what?

Correct Answer: D. Those treated as having been made one-half by each spouse.

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Question 20: James owned an annuity with a cash refund feature. The refund payable at his death was $100,000. He contributes $50,000 in premium payments, which represented 100% of the premiums paid. The amount included in James's estate is what?

Correct Answer: C. $100,000.

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Question 21: Special use valuation under Section 2032A is used to:

Correct Answer: C. Value certain farms or closely-held business interests at their current use rather than their highest and best use.

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Question 22: James has a general power of appointment over certain property which means he has the right to dispose of the property in favor of:

Correct Answer: A. Himself, his estate, his creditors, or his estate's creditors.

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Question 23: What is the greatest advantage of an irrevocable trust?

Correct Answer: C. Its corpus should escape estate taxation in the grantor's estate.

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Question 24: Margaret dies and leaves survivor benefits in her annuity to her husband, Louis. Those benefits could be purchased for $100,000, but Margaret had only paid $80,000 by the time she died. How much will be included in Margaret's gross estate as a result of the survivor benefits?

Correct Answer: A. $80,000.

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Question 25: One's basis in property received as a gift is generally:

Correct Answer: A. The same as the donor's basis plus a gift tax adjustment.

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Question 1: Which of the following statements regarding the senior market is FALSE?

Correct Answer: C. Their primary investment objective is accumulation.

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Question 2: A client is setting up a trust and wants to make sure she is able to change the terms of the trust should the situation change. Which of the following types of trust would provide this option?

Correct Answer: A. Revocable trust.

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Question 3: An individual is filing to begin receiving Social Security benefits and has decided to enroll in Medicare Part B. The individual is told that part of the premium will have to be paid to have to enroll in the program. The individual will be responsible of approximately what percentage of the premium?

Correct Answer: A. 25%

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Question 4: A premature distribution from and IRA would be exempt from the premature distribution penalty under all of the following circumstance EXCEPT

Correct Answer: D. As a result of hardship.

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Question 5: The administration of an estate s governed by state statues and probate courts. There are many steps involved in the process. What is the first step in the process?

Correct Answer: A. To appoint the personal representative.

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Question 6: Jill reached the RMD applicable age in March of this year. By what date must she take her first distribution for her traditional IRA?

Correct Answer: C. April 1 of next year.

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Question 7: Ted and Ariel, both are age 25, are looking to purchase life insurance. They are concerned about having the maximum available coverage but do not have a lot of money at the current time to pay in premiums. Which of the following types of life insurance policies would be most suitable for them to purchase at this time?

Correct Answer: B. Term life.

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Question 8: An individual who wants to maintain a level standard of living after retirement should expect to cover what percentage of retirement income with personal savings and investments?

Correct Answer: C. 45%

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Question 9: With respect to long-term care insurance plans, which of the following statement is FALSE?

Correct Answer: B. All plans must require prior hospitalization before benefits begin.

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Question 10: Which of the following statements regarding retiring under Social Security is FALSE?

Correct Answer: D. In order to collect full Social Security retirement benefits, an individual must cease working.

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Question 11: A customer is thinking about purchasing a corporate bond, and her investment objective is current income. The customer is concerned about taking a high degree of risk and had heard that some bonds issued by corporations are backed by collateral. Which of the following corporate bonds would be backed by collateral?

Correct Answer: B. Mortgage bond.

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Question 12: Ten years ago, Merle invested $25,000 in a single-premium fixed annuity. Today, the value of the annuity account is $40,000. If this year, at age 52, Merle withdraws $10,000, how will that withdrawal be taxed?

Correct Answer: A. The $10,000 will be fully subject to ordinary income tax and premature distribution penalty of 10%.

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Question 13: Joe, age 72, must take $5,000 as a required distribution from his IRA this year. What is the penalty if he takes $7,000 distribution instead?

Correct Answer: A. $0.

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Question 14: All of the following are covered by Medicare Part A EXCEPT

Correct Answer: C. Surgeons’ fees.

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Question 15: All of the following would bypass the probate process at an individual’s death EXCEPT

Correct Answer: D. Property passing to named heirs under the terms of the decedent’s will.

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Question 16: Which of the following types of retirement plans does NOT require mandatory distributions?

Correct Answer: A. Roth IRA.

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Question 17: Which of the following would be considered a fundamental and necessary tool for planning any and all dispositions?

Correct Answer: A. Will.

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Question 18: All of the following statements regarding Medicare are true EXCEPT

Correct Answer: D. Medicare Part D covers hospital expenses.

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Question 19: Which of the following types of retirement plans can include a provision for the distribution of funds due to hardship?

Correct Answer: C. 401(k)s.

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Question 20: A highly compensated employee is looking to defer receipt of some salary until retirement. An advantage of this is that the employee will

Correct Answer: C. Be taxed on the benefits when the benefits are paid out.

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Question 21: An employer is looking to set up a retirement plan for employees that will tell them the exact amount of money they will be receiving each month when they retire. What type of retirement plan is the employer looking to establish?

Correct Answer: B. Defined benefit.

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Question 22: A customer wants to start an investment portfolio and is looking for an investment that will provide diversification. Which of the following investment products would a representative recommend to the client?

Correct Answer: B. Mutual funds.

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Question 23: Which of the following defines the renewability provision for long-term care policies?

Correct Answer: D. The insurer must renew the policy each year but may raise premiums for entire classes of insureds.

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Question 24: A small business is looking to establish a retirement plan for its employees. They have found that there is a type of retirement plan the business can establish that is suited for companies with 100 or fewer employees. What type of retirement plan have they found?

Correct Answer: B. SIMPLE

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Question 25: Under which plan can an employer pick and choose which employees will participate?

Correct Answer: B. Deferred compensation plan.

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Question 1: For a producer to offer Long Term Care Partnership insurance, the producer must complete how many hours of training on Long Term Care?

Correct Answer: A. 8 hours.

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Question 2: When comparing older Americans to the general population, older Americans’ medicinal spending will be:

Correct Answer: B. Double the general population.

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Question 3: Informal caregivers provide all the following except:

Correct Answer: C. Paid Services

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Question 4: For those individuals living alone, adult day care provides:

Correct Answer: D. All the above

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Question 5: Hospice Care is provided by all the following except:

Correct Answer: D. Spouse

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Question 6: Respite care services would exclude:

Correct Answer: C. Cleaning of a rental property.

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Question 7: At an adult day care center all the following may be provided except:

Correct Answer: B. Auto repair

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Question 8: The fist step in the process of case management is:

Correct Answer: A. Evaluation of the patient

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Question 9: Which of the following would not be an example of a formal caregiver?

Correct Answer: A. Spousal care

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Question 10: In most communities, shared living arrangements are licensed by:

Correct Answer: B. Health or Social Service Agency

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Question 11: Shared living arrangements would not include:

Correct Answer: C. Nursing home

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Question 12: Assisted living arrangement would include which of the following services?

Correct Answer: D. All the above

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Question 13: Skilled care would include:

Correct Answer: D. All the above

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Question 14: How many hours of Long Term Care training must a producer complete to continue to sell Long Term Care Insurance when they renew their license?

Correct Answer: C. 4 Hours

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Question 15: Long Term Care Partnership Insurance was established under:

Correct Answer: B. Deficit Reduction Act of 2005

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Question 16: Under the Spousal Impoverishment Act, the spouse can keep the

Correct Answer: C. House valued at $500,000

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Question 17: The majority of residents in nursing homes are:

Correct Answer: A. Over age 65

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Question 18: The cost of assisted living facilities is generally:

Correct Answer: B. Less than a nursing home

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Question 19: The Consumer Guide must be delivered at the time of:

Correct Answer: C. Either event

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Question 20: Insured will be able to exchange an annuity to a Long Term Care policy tax free starting:

Correct Answer: D. January 1, 2010

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Question 21: The service providing a break for the informal caregivers is called:

Correct Answer: D. Respite care

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Question 22: Tax qualified policies require what level of disability?

Correct Answer: C. Expected to last 90 days or more

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Question 23: Which medical condition results in the longest average nursing home stay?

Correct Answer: B. Alzheimer’s

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Question 24: Long Term Care Partnership Insurance requires which of the following?

Correct Answer: D. All the above

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Question 25: Producers that sell a Long Term Care insurance policy to a person on Medicaid, can be fined how much?

Correct Answer: B. $10,000

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Question 1: Who can apply for a Temporary Insurance Producer license?

Correct Answer: A. An insurance company for an individual who is in the process of fulfilling the pre-license education requirements.

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Question 2: Which of the following is an unfair method of competition for which an insurance producer can be ordered to cease and desist and fined NOT more than a $5,000?

Correct Answer: A. Misrepresenting the financial status of an insurance company.

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Question 3: Mr. Auddie Murphy is a licensed insurance producer. Mr. Murphy’s reserve unit is being called up for an extended period of active duty. Which of the following requirements does NOT apply to Mr. Murphy’s situation?

Correct Answer: D. He cannot appoint another qualified producer to service his customers while he is in the military.

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Question 4: Which of the following acts does NOT require an insurance producer license?

Correct Answer: C. Doing strictly clerical work in an insurance office for an hourly wage.

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Question 5: No examination, pre-license education, continuing education or bond requirement applies to which type of license?

Correct Answer: C. Limited Lines Producer license.

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Question 6: Insurance commissions CANNOT be paid to which of the following?

Correct Answer: C. A unlicensed office assistant for clerical work.

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Question 7: Which of the following describes “controlled business”?

Correct Answer: A. Selling insurance to yourself, your own spouse, your own business, or your employer’s business.

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Question 8: Which of the following situations require NO examination to obtain an insurance producer license?

Correct Answer: C. Someone who is applying to reinstate a lapsed insurance producer license within 12 months of its lapse.

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Question 9: An insurance customer is planning on cash surrendering a currently owned Whole Life insurance policy while at the same time buying a new Term Life insurance policy. Which of the following statements is NOT true?

Correct Answer: D. This would be exempt from the Life Insurance Replacement Regulation.

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Question 10: Mr. Ryan James requires a special, high face amount life insurance policy. After diligently searching for an insurance company to write the policy, his insurance producer has been able to find only one insurance company that will issue the policy. The insurance company is NOT admitted in the state were the sale is to occur. Which of the following requirements apply?

Correct Answer: A. The policy must be sold through a Surplus Lines Producer.

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Question 11: Which of the following does NOT require an insurance producer license?

Correct Answer: D. An insurance producer’s salaried office assistant that assists the producer only with administrative duties.

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Question 12: Which would it be if an insurance producer were to give an insurance customer back a 10% discount on the premium out of the insurance producer’s commissions?

Correct Answer: B. Rebating.

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Question 13: The Insurance Director DOES NOT have which of the following powers?

Correct Answer: C. Sentence insurance produces to prison or jail terms.

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Question 14: Which of the following describes a foreign insurance company?

Correct Answer: D. An insurance company operating in a state other than the state were it obtained its original charter.

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Question 15: Which of the following is NOT a penalty for selling insurance without the appropriate insurance producer license?

Correct Answer: A. A Class B Misdemeanor for acting as an insurance producer without an license.

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Question 16: Which of the following would it be if an insurance producer were to give an inexpensive calendar to everyone who bought a policy the previous year?

Correct Answer: A. Advertising and promotion.

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Question 17: The ABC Life Insurance Company offers a life insurance policy where the insured can receive part of the benefits while still alive for long-term nursing care expenses. Which of the following statements does NOT apply?

Correct Answer: D. To sell policies with this provision, the insurance producer must also have a securities representative license.

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Question 18: Which of the following situations requires a Premium Finance Company license?

Correct Answer: A. Allowing more than 10% of all of an insurance producer’s accounts receivable to go over 90 days.

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Question 19: The Life Insurance Solicitation Regulation requires which of the following?

Correct Answer: A. Each person buying a life insurance policy be furnished a “Buyer’s Guide” in a prescribed format.

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Question 20: For which of the following can a person be charged with a Class B Misdemeanor?

Correct Answer: D. Rebating.

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Question 1: An advertisement of an accident/health insurance policy can state which of the following?

Correct Answer: B. The true identity of the insurance company.

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Question 2: Which of the following situations requires a Premium Finance Company license?

Correct Answer: A. Allowing more than 10% of all of an insurance producer’s accounts receivable to go over 90 days.

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Question 3: The Life Insurance Solicitation Regulation requires which of the following?

Correct Answer: A. Each person buying a life insurance policy be furnished a “Buyer’s Guide” in a prescribed format.

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Question 4: Which of the following is a requirement when selling Medicare Supplement Insurance plans?

Correct Answer: D. All of the above.

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Question 5: Which of the following acts does NOT require an insurance producer license?

Correct Answer: C. Doing strictly clerical work in an insurance office for an hourly wage.

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Question 6: Which of the following are requirements of all group accident and health insurance policies?

Correct Answer: D. All of the above.

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Question 7: Which of the following would it be if an insurance producer were to give an inexpensive calendar to everyone who bought a policy the previous year?

Correct Answer: A. Advertising and promotion.

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Question 8: Which of the following is an unfair method of competition for which an insurance producer can be ordered to cease and desist and fined NOT more than a $5,000?

Correct Answer: A. Misrepresenting the financial status of an insurance company.

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Question 9: Which of the following is NOT a penalty for selling insurance without the appropriate insurance producer license?

Correct Answer: A. A Class B Misdemeanor for acting as an insurance producer without an license.

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Question 10: Mr. Auddie Murphy is a licensed insurance producer. Mr. Murphy’s reserve unit is being called up for an extended period of active duty. Which of the following requirements does NOT apply to Mr. Murphy’s situation?

Correct Answer: D. He CANNOT appoint another qualified producer to service his customers while he is in the military.

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Question 11: Mr. Ryan James requires a special, high face amount life insurance policy. After diligently searching for an insurance company to write the policy, his insurance producer has been able to find only one insurance company that will issue the policy. The insurance company is NOT admitted in the state were the sale is to occur. Which of the following requirements apply?

Correct Answer: A. The policy must be sold through a Surplus Lines Producer.

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Question 12: The ABC Life Insurance Company offers a life insurance policy where the insured can receive part of the benefits while still alive for long-term nursing care expenses. Which of the following statements does NOT apply?

Correct Answer: D. To sell policies with this provision, the insurance producer must also have a securities representative license.

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Question 13: An insurance customer is planning on cash surrendering a currently owned Whole Life insurance policy while at the same time buying a new Term Life insurance policy. Which of the following statements is NOT true?

Correct Answer: D. This would be exempt from the Life Insurance Replacement Regulation.

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Question 14: Insurance commissions CANNOT be paid to which of the following?

Correct Answer: C. A unlicensed office assistant for clerical work.

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Question 15: Which of the following situations require NO examination to obtain an insurance producer license?

Correct Answer: C. Someone who is applying to reinstate a lapsed insurance producer license within 12 months of its lapse.

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Question 16: Which of the following describes a foreign insurance company?

Correct Answer: D. An insurance company operating in a state other than the state were it obtained its original charter.

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Question 17: No examination, pre-license education, continuing education or bond requirement applies to which type of license?

Correct Answer: C. Limited Lines Producer license.

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Question 18: Who can apply for a Temporary Insurance Producer license?

Correct Answer: A. An insurance company for an individual who is in the process of fulfilling the pre-license education requirements.

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Question 19: Which of the following describes “controlled business”?

Correct Answer: A. Selling insurance to yourself, your own spouse, your own business, or your employer’s business.

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Question 20: Which of the following rules do NOT apply to Health Maintenance Organizations (HMO’s)?

Correct Answer: D. An HMO plan can be terminated due to the covered member has incurred bad health.

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Question 21: Which would it be if an insurance producer were to give an insurance customer back a 10% discount on the premium out of the insurance producer’s commissions?

Correct Answer: B. Rebating.

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Question 22: Which of the following is NOT required of Long-Term Care Insurance plans?

Correct Answer: D. There are NO additional requirements to sell Long-Term Care Insurance plans other than having an accident/health insurance producer license.

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Question 23: The Insurance Director does NOT have which of the following powers?

Correct Answer: C. Sentence insurance produces to prison or jail terms.

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Question 24: Which of the following does NOT require an insurance producer license?

Correct Answer: D. An insurance producer’s salaried office assistant that assists the producer only with administrative duties.

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Question 25: For which of the following can a person be charged with a Class B Misdemeanor?

Correct Answer: D. Rebating.

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Question 1: Accidental Death and Dismemberment insurance will cover which of the following?

Correct Answer: B. Loss of a hand.

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Question 2: Which is a requirement that certain percentages of eligible members must be included in order to avoid adverse selection?

Correct Answer: A. Participation requirement.

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Question 3: Which of the following requires that the applicant be warned that there may be a Consumer Investigative report?

Correct Answer: A. Fair Credit Reporting Act.

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Question 4: Which of the following provisions helps an insurance company avoid individuals that change jobs frequently and, therefore, would be more claim-prone?

Correct Answer: A. Probationary period.

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Question 5: What is the purpose of a waiting (elimination) period?

Correct Answer: D. To determine how long a person must be disabled before his disability is considered to be “permanent.”

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Question 6: Which of the following organizations issue contracts which provide an individual with all of the specified health services that he/she needs as long as he/she goes to a doctor, clinic or hospital (service provider) which participates in the plan?

Correct Answer: D. Health Maintenance Organization (HMO).

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Question 7: Which of the following is a required policy provision stating that a policy is reinstated forty-five days from the date of a reinstatement application form?

Correct Answer: B. Reinstatement provision.

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Question 8: Hospital Expense coverage covers all of the following EXCEPT?

Correct Answer: D. Doctor charges for a medical condition that did not require hospital treatment.

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Question 9: Which of the following statements concerning dental coverage is true?

Correct Answer: D. Dental insurance is most often issued on a group basis.

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Question 10: Which of the following provisions prohibits an insurance company from nonrenewing a health insurance policy but does allow the insurance company to change rates by broad class?

Correct Answer: C. Guaranteed Renewable policy provision.

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Question 11: Which of the following is a limited time period during which an individual can apply for group insurance benefits without evidence of insurability?

Correct Answer: B. Enrollment period.

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Question 12: Which of the following coverages will provide benefits to pay installment loan payments that come due while a person is off work disabled?

Correct Answer: B. Credit Disability coverage.

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Question 13: Which of the following describes a program that may be obtained by a school to cover the cost of student injuries?

Correct Answer: A. Blanket Accident and Health coverage.

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Question 14: Which of the following statements concerning an Accident and Health insurance policy Cancellation provision is true?

Correct Answer: D. The insurance company can cancel by giving the insured thirty days notice.

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Question 15: Assuming that the premium was paid with the application, when does a health insurance policy go into effect?

Correct Answer: A. Upon completion of the application.

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Question 16: Which of the following is a federal law which establishes health insurance standards and assures the portability of health insurance for individuals that have been covered by group insurance?

Correct Answer: A. HIPAA

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Question 17: Medicare Part B covers which of the following?

Correct Answer: B. Medical expenses

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Question 18: Which of the following is a required policy provision stating that NO changes are valid unless on a rider signed by the officer of the insurance company?

Correct Answer: A. Entire Policy--Changes provision.

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Question 19: Which of the following Disability Income policies is most liberal?

Correct Answer: A. A policy that defines total disability on an insured’s own occupation basis.

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Question 20: Which of the following provisions allows the insured ten days from the date of receiving the policy to read it over, return it and receive a premium refund?

Correct Answer: A. Ten Day Free Look provision.

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Question 21: Which of the following describes Major Medical coverage?

Correct Answer: A. It covers usual, reasonable and customary eligible hospital and medical expenses.

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Question 22: Which of the following is a required policy provision requiring that the insurance company send claim forms to the insured within fifteen days of Notice of Loss?

Correct Answer: C. Claim Forms provision.

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Question 23: An insurance company can contest (refuse to pay) a health insurance claim under all of the following circumstances EXCEPT?

Correct Answer: C. An unintentional mistake on the application discovered five years after the date of the application.

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Question 24: An Individual Disability Income policy requires all of the following provisions EXCEPT?

Correct Answer: D. Change of Occupation provision.

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Question 25: What is the purpose of policyholder participation (coinsurance)?

Correct Answer: A. Discourage unnecessary medical treatment.

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Question 26: Which of the following statements best describes Medicaid?

Correct Answer: D. It is a federally funded, state administered program.

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Question 27: Which of the following describes a time period during which coverage is extended so as to avoid unintentional policy lapse?

Correct Answer: D. Grace period.

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Question 28: Which of the following statements most accurately describes the underwriting practice called experience rating?

Correct Answer: A. Premiums are based primarily on previous years' claims experiences.

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Question 29: Which of the following reports would be used to determine if the applicant has any particular moral or character risks?

Correct Answer: A. Inspection report.

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Question 30: Which of the following is a non-profit organization, organized under state laws for the purpose of providing hospital services?

Correct Answer: A. Blue Cross.

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Question 31: Under which of the following circumstances would a Long-Term Care (LTC) policy pay benefits?

Correct Answer: B. The insured is in a long-term care facility because he/she cannot perform Activities of Daily Living (ADL's).

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Question 32: Your insured has Major Medical coverage. Her policy has a $500 deductible. After satisfying her deductible, the policy pays 80% of eligible expenses. The policy has a $10,000 stop loss. If this insured were to have $50,000 in eligible expenses, what would be the insured’s maximum out of pocket?

Correct Answer: D. $2500.

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Question 33: Which of the following statements concerning Hospital Expense coverage is true?

Correct Answer: D. It pays hospital expenses.

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Question 34: Which of the following is a source of information used in evaluating a health insurance application?

Correct Answer: A. Age of the insured.

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Question 35: Which is NOT a common Accident/Health insurance premium mode?

Correct Answer: C. Credit card payment.

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Question 36: Which of the following policy provisions are optional?

Correct Answer: A. Change of Occupation provision.

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Question 37: Assuming that the premium is NOT paid with the application, when does a health insurance policy take effect?

Correct Answer: D. Date that the policy is delivered.

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Question 38: Under which of the following situations would a person qualify for Social Security Disability (OASDI) benefits?

Correct Answer: A. The individual has over 40 quarters Social Security coverage.

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Question 39: Which of the following describes a condition where the insurance company has insured too many unhealthy individuals compared to the young, healthy insureds?

Correct Answer: C. Adverse selection.

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Question 40: Which of the following documents would indicate to an underwriter that a benefit being applied for is justified in relation to the applicant's income?

Correct Answer: B. Credit report.

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Question 41: Which of the following organizations serves as a clearing house for medical information collected on insurance applicants?

Correct Answer: D. Medical Information Bureau (MIB) report.

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Question 42: Which of the following does NOT describe Major Medical coverage?

Correct Answer: D. Full coverage on cosmetic and dental surgery.

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Question 43: Which of the following describes a private insurance company health insurance policy?

Correct Answer: B. It covers risk-type expenses

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Question 44: Which of the following statements describes Disability Income coverage?

Correct Answer: D. Most policies specify a maximum benefit period as well as a benefit amount.

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Question 45: Which of the following is a required policy provision requiring that the insurance company pay claims NO less often than monthly?

Correct Answer: D. Time of Payment of Claims provision.

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Question 46: Medicare Part A covers which of the following EXCEPT?

Correct Answer: D. Physician charges.

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Question 47: Which of the following coverages will cover loss of income due to loss of a finger caused by accidental means?

Correct Answer: B. Disability Income coverage.

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Question 48: Which of the following is a statistical table used to calculate health insurance rates.

Correct Answer: B. Morbidity actuarial tables.

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Question 49: Which of the following is a federal law intended to protect the applicant with regard to information collected about him/her?

Correct Answer: C. Fair Credit Reporting Act.

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Question 50: What do you call a policy that combines Hospital Expense Coverage and Major Medical Coverage?

Correct Answer: C. Comprehensive Medical Expense Coverage.

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Question 1: Which of the following statements concerning an Other Insurance With Other Companies provision is NOT true?

Correct Answer: A. It provides that if the insured has any insurance with any other insurance company, coverage under any policy containing the Insurance With Other Companies provision does not apply.

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Question 2: All of the following are covered under an Accidental Death and Dismemberment policy EXCEPT?

Correct Answer: C. Loss of hearing.

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Question 3: Which of the following statements concerning the Misstatement of Age provision is true?

Correct Answer: D. This provision applies to the entire duration that the policy is in effect and is not limited to the two year incontestability period.

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Question 4: Which of the following statements concerning the Change of Beneficiary provision is true?

Correct Answer: C. It is a mandatory provision.

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Question 5: All of the following statements concerning an Accident and Health policy Insuring clause are true EXCEPT?

Correct Answer: D. An accidental means insuring clause covers all of the insured’s injury expenses.

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Question 6: All of the following qualify for Group Accident and Health insurance EXCEPT?

Correct Answer: A. Less than ten employees of two or more employers.

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Question 7: Mr. Smith’s Accident and Health policy contains an Intoxicants and Narcotics provision. Which of the following statements concerning the provision is true?

Correct Answer: D. It is an optional uniform policy provision.

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Question 8: Which of the following would be classified as a service organization?

Correct Answer: C. Blue Cross/Blue Shield.

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Question 9: Which of the following is NOT an example of a government health insurance program?

Correct Answer: C. A Health Maintenance Organization (HMO).

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Question 10: Ms. Anna has a clause in her Disability Income policy which provides that after she has been totally disabled for more than 6 months her premiums will be waived. Which of the following statements concerning that provision is true?

Correct Answer: D. It is called the Waiver of Premium provision.

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Question 11: Which of the following statements concerning an Unpaid Premium provision is true?

Correct Answer: B. It allows the insurance company to deduct unpaid premiums from claims.

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Question 12: Which of the following statements concerning Group Accident and Health insurance is true?

Correct Answer: B. A certificate is issued to each covered member.

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Question 13: Mary Jones has Dental Expense coverage. Her policy will pay 80% of all her dental expenses after she has satisfied a $100 annual deductible. Which of the following statements concerning her Dental Expense coverage is true?

Correct Answer: A. She has blanket Dental Expense coverage.

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Question 14: Which of the following statements concerning an Accident and Health policy Cancellation provision is true?

Correct Answer: D. If included in a policy, it allows the insurance company to cancel the policy in the middle of the policy term by giving 30 days notice.

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Question 15: Mr. Jones owns an Accident and Health policy. He is dissatisfied with a claim settlement that he has received for a hospital bill. He desires to sue the insurance company. Which of the following statements concerning the length of time within which he must bring his law suit is true?

Correct Answer: B. He cannot bring a lawsuit more than three years after proof of loss has been given.

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Question 16: Which of the following statements concerning insurance organizations is true?

Correct Answer: B. Service organizations provide health services to their covered members for services provided by a service provider that is in the service organization network.

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Question 17: Which of the following statements about Disability Income coverage is true?

Correct Answer: B. Total disability benefits are usually issued in a stated benefit amount.

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Question 18: All of the following statements concerning the conversion of a Group Accident and Health policy are true EXCEPT?

Correct Answer: A. In order for HIPAA to apply and for an individual to be guaranteed the right to convert, a person must have been employed six months.

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Question 19: Which of the following statements concerning a policy which excludes injuries sustained in aircraft is NOT true?

Correct Answer: C. It usually provides that injuries sustained while flying as a crew member on a commercial airline will be covered.

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Question 20: Which of the following statements concerning Medicare is true?

Correct Answer: D. It is intended to be a base of protection upon which it is expected that an individual will add private insurance coverage.

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Question 21: Which of the following describes an impairment rider?

Correct Answer: C. It excludes only those conditions which are specifically named.

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Question 22: The period at the beginning of a disability policy during which NO benefits are payable is called which of the following?

Correct Answer: A. A Waiting (Elimination) period.

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Question 23: All of the following are sources of insurability information EXCEPT?

Correct Answer: D. Facility of Payment clause.

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Question 24: Your customer has Major Medical coverage which has a $1000 deductible, 80% coinsurance clause and $20,000 stop loss. Which applies?

Correct Answer: C. $5000 maximum out-of-pocket.

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Question 25: Which of the following is usually NOT included in Major Medical coverage?

Correct Answer: C. Coverage for cosmetic and dental surgery.

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Question 26: Which of the following statement regarding Major Medical coverage is NOT true?

Correct Answer: A. The copayment and the deductible are the same thing.

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Question 27: Which of the following statements concerning representations and warranties is NOT true?

Correct Answer: C. It is much more difficult for an insurance company to contest a claim (refuse to pay a claim) due to a warranted statement than a representation.

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Question 28: What do you call a policy that combines both Major Medical coverage and Hospital Expense coverage?

Correct Answer: A. Comprehensive Medical Expense coverage.

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Question 29: Which of the following benefits are seldom excluded?

Correct Answer: C. Accidental injuries.

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Question 30: The Grace Period provision states which of the following?

Correct Answer: A. If premiums are payable weekly, the Grace Period must be at least 7 days.

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Question 31: Who would buy Long-Term Care (LTC) insurance?

Correct Answer: B. Someone wanting indemnity (reimbursement) for long-term care expenses while confined to a long-term facility.

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Question 32: What is the purpose of a private insurance company Accident and Health insurance policy?

Correct Answer: C. To transfer from the insured to the insurance company the risk of uncertain losses that the insured might have as a result of accident and sickness.

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Question 33: Mr. Jones’s Disability Income policy has a 30 day Waiting (Elimination) period, provides up to two years of benefits and has a six month Recurrent Disability provision. Mr. Jones is off work for six months, returns back to work for seven months and then is unable to resume work as a result of the same symptom. Which of the following statements concerning Mr. Jones’s circumstances is true?

Correct Answer: D. Mr. Jones could collect a total of 29 months of benefits.

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Question 34: Which of the following statements concerning the Consideration clause of an Accident and Health policy is NOT true?

Correct Answer: A. It states that the insurance company will not be responsible for the validity of an assignment of a policy.

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Question 35: All but one of the following are optional provisions, NOT required in all individual Accident and Health policies, but if an insurance company uses a provision of this type it must meet state law requirements. Which one is NOT an optional provision?

Correct Answer: A. Change of Beneficiary.

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Question 36: Ms. Emily has a Pre-Existing Condition clause in her Disability Income policy. The provision states that any condition for which she has received medication or treatment within the six months preceding coverage will be considered to be a pre-existing condition. It states that the pre-existing conditions will be excluded for 180 days. Which of the following statements concerning her Pre-Existing Condition clause is true?

Correct Answer: B. At the end of the 180 day exclusion period all conditions including the pre-existing conditions will be covered.

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Question 37: Which of the following statements about an Accident and Health insurance policy is NOT true?

Correct Answer: C. Expense Accident and Health insurance policies are usually not coordinating.

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Question 38: Mr. Rangey has in his Hospital Expense policy a provision which states that his insurance company does NOT have to renew the policy if they decide to quit writing insurance in the state in which Mr. Rangey is a resident. What type of renewability provision is this called?

Correct Answer: B. Conditionally Renewable.

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Question 39: Which of the following statements concerning the Entire Policy - Changes provision is NOT true?

Correct Answer: B. It states that if the insured is to sue the insurance company he/she must file his/her suit within 60 days after notice of loss.

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Question 40: Which of the following coverages are automatic without charge under Medicare?

Correct Answer: A. Hospital Insurance Plan - Part A.

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Question 41: The Fair Credit Reporting Act requires that an insurance company do all of the following EXCEPT?

Correct Answer: C. The insurance company must let the applicant have a copy of all inspection and medical reports.

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Question 42: Which of the following statements concerning the Accident and Health policy Claim Forms provision is true?

Correct Answer: D. The insurance company must provide the insured with claim forms within 15 days after receiving notice of claim.

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Question 43: All of the following statements concerning conditional receipts are true EXCEPT?

Correct Answer: C. Conditional receipts are not binding.

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Question 44: Which of the following statements concerning Blanket Accident and Health insurance is true?

Correct Answer: C. It is often issued to camps, sport teams and schools.

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Question 45: Which of the following statements concerning Social Security Disability insurance benefits is true?

Correct Answer: A. To be eligible, an individual must have worked and contributed the required number of quarters to achieve disability insurance status.

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Question 46: Which of the following statements about Medicare Supplementary Medical Insurance Plan (Part B) is NOT true?

Correct Answer: D. It will cover custodial nursing care expenses.

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Question 47: Which of the following statements is NOT true?

Correct Answer: C. Optionally Renewable policies provide the insured the strongest guarantee of any policy that the policy will be renewed.

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Question 48: A policy which is designed to pay installment payments that come due while an insured is disabled is called which of the following?

Correct Answer: B. Credit Disability coverage.

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Question 49: All of the following benefits can be included under Hospital Expense Coverage EXCEPT?

Correct Answer: A. Dental Expense benefits.

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Question 50: Which of the following statements concerning the time within which claims must be paid by the insurance company is true?

Correct Answer: B. An insurance company can pay claims no less frequently than monthly.

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Question 1: Which of the following expenses are covered under Medicare Medical Insurance Plan (Part B)?

Correct Answer: B. Doctor office charges.

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Question 2: Which of the following statements concerning a Relations of Earnings provision is true?

Correct Answer: A. It allows the insurance company to reduce Disability Income benefits down to either the insured’s income immediately prior to disability or the insured’s last two years income, which ever is greater.

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Question 3: The Reinstatement provision of an Accident and Health insurance policy provides what?

Correct Answer: B. If a reinstatement application is required by the insurance company, the reinstatement becomes effective automatically 45 days after the date of the reinstatement application, unless the insurance company rejects or approves the reinstatement before then.

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Question 4: Which of the following is a purpose of hospital/medical expense insurance?

Correct Answer: A. To protect insured’s against the financial risk of illness or injury expenses they cannot individually afford.

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Question 5: A Major Medical policy has a $1000 deductible. It has a 80% coinsurance clause. It has a $2000 maximum out-of-pocket. How much is the stop loss?

Correct Answer: C. $5000.

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Question 6: Which of the following statements concerning Franchise (Wholesale) Group Accident and Health insurance is true?

Correct Answer: D. It is a special type of group insurance that is used for groups that would not otherwise qualify for group insurance.

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Question 7: All of the following statements concerning Medicaid are true EXCEPT?

Correct Answer: D. Private insurance companies typically issue insurance policies which pick up the “gaps”, that is deductibles.

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Question 8: Which of the following is NOT a cost savings available through Group Accident and Health insurance?

Correct Answer: C. Adverse selection.

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Question 9: Which provision is sometimes used to effect payment of premium when loss occurs during the Grace Period?

Correct Answer: B. The Unpaid Premium provision.

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Question 10: Which of the following statements concerning the Incontestability provision is true?

Correct Answer: C. It allows the insurance company to refuse to pay a claim due to a misstatement on an application during the first two years.

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Question 11: Which of the following provisions is required in all individual Accident and Health insurance policies?

Correct Answer: C. Physical Examination and Autopsy provision.

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Question 12: All of the following statements concerning the Other Insurance With The Same Company provision are true EXCEPT?

Correct Answer: D. It cannot be written so that the insured is allowed the option to pick which policy he/she wants to apply and receive a return of premium on the other policy.

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Question 13: A Disability Income policy that is used to cover a business or professional person’s continuing business overhead expenses while disabled is called which of the following?

Correct Answer: A. Business Overhead Expense coverage.

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Question 14: Mr. Ryan bought a Disability Income policy from his insurance producer, Ms. Caitlin. Which of the following statements concerning the Guaranteed Insurability provision contained in that policy would apply?

Correct Answer: A. It guarantees Mr. Ryan the right to purchase additional amounts of insurance.

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Question 15: The last time Mr. Ryan went to the hospital he was asked at his admission to sign a form assigning the benefits that he was entitled to under his Accident and Health policy to the hospital. Which of the following statements concerning the assignment of benefits would apply?

Correct Answer: B. The Assignment provision says that while the insurance company will pay benefits to an assignee, it will not be responsible for determining if the assignment is valid and legal.

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Question 16: Which of the following statements concerning the 10 Day Free Look provision on an Accident and Health policy does NOT apply?

Correct Answer: D. Under the 10 Day Free Look provision, the insured can receive premiums back only if the insured has a substantial change in health status.

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Question 17: An employment period which the insured must satisfy before the insured becomes eligible for coverage is which of the following?

Correct Answer: B. A Probationary period.

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Question 18: Which of the following organizations would you usually expect to issue contracts allowing an individual to go only to a participating service provider to obtain specified types of services at any time when the insured person requires them?

Correct Answer: B. HMO’s

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Question 19: Which of the following does NOT describe an Accident and Health insurance policy?

Correct Answer: C. Illegal purpose.

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Question 20: All of the following are true about Medicare EXCEPT?

Correct Answer: C. There is no limit as to the length of time a person can stay in the hospital and be covered by Medicare.

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Question 21: Which policy would be best for someone to buy if their goal was the fullest, most complete hospital/medical expense coverage for someone under age 65?

Correct Answer: C. Major Medical coverage.

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Question 22: If an underwriter wants to make sure that the insured is of good character and that the amount of insurance being applied for is reasonable compared to the insured’s income and net worth, which of the following sources of information will the underwriter likely obtain?

Correct Answer: A. A credit report and an inspection report.

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Question 23: All of the following are ALWAYS required to put an accident and health insurance policy into effect EXCEPT?

Correct Answer: C. Delivery of the policy.

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Question 24: Which of the following statements describes the Medical Information Bureau (MIB)?

Correct Answer: B. It is an organization to which the insurance company may send health information and receive back health information that the applicant has furnished to other insurance companies to which the applicant has applied in the past.

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Question 25: Which of the following are covered by an Accidental Death and Dismemberment policy?

Correct Answer: A. Death or dismemberment resulting from an injury sustained in an accident within 100 days of the accident.

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Question 26: Which of the following statements concerning an Accident and Health policy Pre-Existing Condition clause is true?

Correct Answer: B. Including a Pre-Existing Condition clause in an insurance policy helps the insurance company manage and control adverse selection.

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Question 27: Which of the following describes an Enrollment Period?

Correct Answer: C. A period of time, often 30 days, during which new eligible members may be admitted to the group usually without evidence of insurability.

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Question 28: Which of the following concerning hospital expense coverage is NOT true?

Correct Answer: B. It cannot be combined with Major Medical coverage to create Comprehensive Medical Expense coverage.

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Question 29: All of the following clauses are required in all individual Accident and Health policies EXCEPT?

Correct Answer: D. A Relation of Earnings provision.

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Question 30: Mr. Ryan is applying for a Disability Income policy. He has submitted an application and a medical questionnaire. Upon reviewing this, the underwriter has determined that he wants more information. What will probably be the next form of information that the underwriter will want?

Correct Answer: A. A Paramedical exam.

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Question 31: Which of the following statements concerning Disability Income insurance is NOT true?

Correct Answer: C. Disability Income coverage requires the insured to be confined to a hospital.

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Question 32: Which of the following statements concerning an Accident and Health insurance policy Proof of Loss requirement applies?

Correct Answer: A. The insurance company can require the insured to give the insurance company proof of loss within 90 days of Notice of Claim.

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Question 33: Which of the following organizations usually issue risk indemnity (reimbursement) insurance policies?

Correct Answer: A. Private insurance companies.

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Question 34: Which of the following would be classified as a warranted statement?

Correct Answer: B. An answer on a Dangerous Recreational questionnaire upon which the insurance company may assess an extra premium charge.

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Question 35: Mr. Smith is insured under an Accident and Health insurance policy. He sustained gun shot wounds while he was attempting to rob a grocery store. Which of the following statements concerning his coverage applies?

Correct Answer: B. He will not be covered if his policy contains an Illegal Occupations provision.

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Question 36: Which of the following describes Usual, Reasonable and Customary charges?

Correct Answer: D. Most policies cover only expenses that do not exceed what the insurance company has determined to be reasonable and customary for the region in which the insured receives service.

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Question 37: Which of the following statements regarding an insurance company’s function in an Accident and Health insurance risk indemnity policy is true?

Correct Answer: A. By collecting premiums from thousands of people, the majority of which are not going to have large losses, the insurance company is able to pay claims to those few individuals who do incur large claims.

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Question 38: An Accident and Health insurance policy could best be described as which of the following?

Correct Answer: C. Contract of indemnity.

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Question 39: If an application is filled out, but the initial premium is NOT paid with the application, all of the following requirements must be met EXCEPT?

Correct Answer: D. The insured must take another physical examination, if one was originally required with the application.

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Question 40: Exclusions found in some Accident and Health policy include all of the following EXCEPT?

Correct Answer: D. An insuring agreement.

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Question 41: Which of the following is NOT covered under an Accidental Death and Dismemberment policy?

Correct Answer: A. Loss of a finger.

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Question 42: Which of the following statements is true?

Correct Answer: B. In order for an injury to result from accidental means both the injury and the cause of the injury must be unintended.

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Question 43: All of the following concerning Health Savings Accounts (HSA’s) are true EXCEPT?

Correct Answer: C. Contributions to Health Savings Accounts (HSA’s) are usually subject to tax.

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Question 44: All of the following statements concerning the Grace Period found in an Accident and Health policy are true EXCEPT?

Correct Answer: B. The Grace Period on a weekly premium policy cannot be any less than 30 days.

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Question 45: Which of the following statements concerning a Noncancelable and Guaranteed Renewable policy is true?

Correct Answer: D. The premiums are determined when the policy is issued and can never be changed.

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Question 46: Which would be an expense reimbursement policy that would typically have a coordination of benefits provision?

Correct Answer: B. Major Medical coverage.

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Question 47: Mr. Smith owns a Disability Income policy. His policy has a Change of Occupation provision. Which of the following statements concerning that provision is true?

Correct Answer: B. If Mr. Smith changes his occupation to a more hazardous one, the insurance company can reduce benefits.

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Question 48: Disability Income benefits can be paid in any of the following ways EXCEPT?

Correct Answer: D. Once the insured has satisfied the Waiting (Elimination) Period requirement, benefits are payable until the end of the policy benefit period regardless of whether the insured is able to return to work or not.

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Question 49: Which of the following statements concerning an Accident and Health policy Notice of Claim provision is true?

Correct Answer: B. It provides that notice of a claim must be given within 20 days of the loss.

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Question 50: All of the following statements concerning Group Accident and Health insurance are true EXCEPT?

Correct Answer: C. HIPAA does not apply to termination of coverage.

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Question 1: Mr. Ryan James called up the agent that he has been doing business with for years, Mr. Wally Jordan, and told him about a new building that he had recently purchased. He requested that Mr. Jordan arrange proper insurance coverages. Mr. Jordan assured him that he would and told him he would send him a bill for the coverages. Which of the following describes these circumstances?

Correct Answer: C. Oral Binder.

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Question 2: Physical Damage coverage covers a newly acquired or replacement auto if reported within how many days?

Correct Answer: C. 30 days.

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Question 3: Which of the following is NOT a party to a bond?

Correct Answer: A. Robber.

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Question 4: Employer's Non-Ownership Liability coverage covers which of the following?

Correct Answer: D. An employer's liability caused by an employee driving his or her personal car on company business.

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Question 5: Which of the following is excluded under Auto Liability coverage?

Correct Answer: B. Liability caused to an employee.

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Question 6: Which of the following is covered under Transportation Expense (Rental Reimbursement) Coverage?

Correct Answer: B. Rental expenses the insured incurs because the insured is unable to drive due to damage covered under physical damage coverage.

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Question 7: Which of the following is found on the declarations page?

Correct Answer: D. A policy effective date.

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Question 8: Ms. Caitlin has a two-door sedan which she personally owns which she uses mostly for business. Which type of auto policy does it qualify for?

Correct Answer: A. Personal auto policy.

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Question 9: Liability coverage will pay for which of the following?

Correct Answer: B. Damage to a third party auto.

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Question 10: All of the following are covered by a personal auto policy EXCEPT?

Correct Answer: C. Injuries sustained by the insured’s employee while riding in the insured auto.

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Question 11: All of the following are always excluded under a Commercial General Liability (CGL) policy EXCEPT?

Correct Answer: B. Products and Completed Operations Liability.

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Question 12: Which of the following describes risk?

Correct Answer: A. The degree of exposure to loss caused by covered peril.

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Question 13: Which of the following is a purpose of insurance?

Correct Answer: B. To transfer to insurance companies pure risk where there is no opportunity for the insured to profit.

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Question 14: Which of the following statements describes an accident?

Correct Answer: C. A sudden, unforeseen, unintended event.

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Question 15: Which of the following is NOT covered under Premises Burglary coverage?

Correct Answer: A. Robbery of money.

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Question 16: Ms. E. Ace has a 25/50/20 Auto Liability policy. She is involved in an accident with Mr. W. Jordan. Mr. W. Jordan made a claim against the insured, E. Ace. Ms. Ace's insurance company decided to defend against the claim in court. A $10,000 judgment was awarded Mr. Jordan. The insurance company incurred $4,000 attorney's fees and court costs. Which of the following statements are true?

Correct Answer: B. The insurance company's maximum liability is $14,000 in this circumstance.

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Question 17: Which of the following is NOT a necessary element (requirement) to make a liability claim against someone else?

Correct Answer: D. Insurable interest.

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Question 18: Which of the following is covered by Auto Liability coverage?

Correct Answer: D. Liability caused by an employee while driving the insured auto on business.

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Question 19: Which of the following statements describes the legal requirement that a contract be consistent with public policy?

Correct Answer: B. Legal subject.

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Question 20: Autos are usually insured for which of the following values?

Correct Answer: B. Actual cash value.

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Question 21: Collision or Upset coverage covers which of the following?

Correct Answer: C. Damage caused by collision with a fixed object.

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Question 22: Products and Completed Operations (Products Liability) coverage EXCLUDES which of the following?

Correct Answer: D. Damage to the product itself.

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Question 23: Which of the following describes a mysterious disappearance?

Correct Answer: D. An overcoat and hat are found missing from a coat rack.

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Question 24: Auto Comprehensive (All-Risk) coverage covers all of the following EXCEPT?

Correct Answer: D. Upset.

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Question 25: Auto Medical Payments coverage covers which of the following?

Correct Answer: D. Medical expenses resulting from injuries the insured sustained while driving his/her own car.

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Question 26: Contractual Liability coverage can be written to cover which of the following?

Correct Answer: A. Liability the insured has assumed under the hold harmless clause contained in a business contract.

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Question 27: Which of the following is NOT excluded under a Commercial General Liability (CGL) policy?

Correct Answer: A. Liability arising out of a new hazard that occurred during the policy term, but was not reported to the insurance company.

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Question 28: Which of the following describes theft coverage?

Correct Answer: A. It covers more than burglary coverage.

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Question 29: Which of the following statements about Coverage C - Medical Payments of a Commercial General Liability (CGL) policy is NOT true?

Correct Answer: B. The injured person must prove that the insured is legally liable.

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Question 30: Which of the following describes insurable interest and indemnity?

Correct Answer: A. Being in a position where you can stand to lose money should damage occur.

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Question 31: Which of the following is NOT covered under Coverage A - Bodily Injury and Property Damage of a Commercial General Liability (CGL) policy?

Correct Answer: C. Personal and Advertising Injury Liability.

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Question 32: Mr. Wally Jordan is injured because of an accident caused by a defective stove burner. The stove was sold to him by Everyday Appliance Store. It was manufactured by Hot Times Stove Manufacturing Company. Which of the following applies?

Correct Answer: D. He would have a products liability claim against both the store and the manufacturer.

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Question 33: Ms. Ciara has a Hot Rod Mutual Insurance Company auto insurance policy. On November 1, she traded her 63 Ford in on a 77 Chevy. On November 3 she had an accident. On November 5 she reported the accident and the purchase of her new auto. Which of the following statements are true?

Correct Answer: D. Her new Chevy is automatically covered as a replacement auto.

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Question 34: Which of the following is NOT a Supplemental payment found in most auto policies?

Correct Answer: C. The insured's medical expenses incurred in an auto accident.

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Question 35: Which of the following describes Operations Liability coverage found under Coverage A of a Commercial General Liability (CGL) policy?

Correct Answer: C. Liability arising from an operation or activity being performed by the insured or an employee.

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Question 36: Which of the following is NOT covered under Coverage B - Personal and Advertising Injury Liability coverage of a Commercial General Liability (CGL) policy?

Correct Answer: D. Liability caused by advertising the wrong quality or price of a good.

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Question 37: Which of the following qualifies as a burglary?

Correct Answer: D. Someone breaks into a store building.

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Question 38: Who would buy Commercial Excess-Umbrella Liability coverage?

Correct Answer: C. A business that has particularly high risk of being sued in large amounts.

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Question 39: Which of the following describes a performance bond?

Correct Answer: D. It guarantees that a contractor will complete a job on time, according to specifications and without liens for materials or labor.

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Question 40: Which of the following describes liability which one person such as an employer has for the actions of another such as an employee?

Correct Answer: A. Vicarious liability.

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Question 41: Which is a coverage that is NOT automatically covered under Robbery and Safe Burglary coverage?

Correct Answer: D. Theft.

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Question 42: Which of the following statements concerning the Auto Liability coverage is NOT true?

Correct Answer: D. It covers individuals other than members of the insured’s household while driving the insured auto whether they have permission or not.

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Question 43: Which of the following is NOT covered under Auto Liability coverage?

Correct Answer: C. A friend's trailer being towed behind the friend's auto while the insured is a passenger.

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Question 44: Which of the following is covered under Coverage A - Bodily Injury and Property Damage Liability coverage of a Commercial General Liability (CGL) policy?

Correct Answer: D. Liability arising from the ownership, use or occupancy of premises including all of the above.

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Question 45: Which of the following describes negligence?

Correct Answer: C. Failing to take reasonable precautions for an individual under the circumstances.

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Question 46: Ms. Jules was involved in an auto accident. She has a policy that has Liability limits of 25/50/20. The injured party, Ms. Tori, sued Ms. Jules for $25,000. Her insurance company decided to defend against the claim. They incurred $6,000 in attorney's fees, court costs and bail bond costs and lost. How much will the insurance company pay all total under both the Liability limits and Supplemental payments?

Correct Answer: A. $31,000.

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Question 47: Physical Damage coverage covers which of the following autos?

Correct Answer: D. Damage to a non-owned auto not regularly driven by the insured which occurred while the auto was driven by an insured.

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Question 48: Which of the following is covered under a Commercial Excess-Umbrella Liability policy?

Correct Answer: D. Claims which exceed primary coverage limits.

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Question 49: Mr. Harold Lloyd bought an Employee Dishonesty policy for his business. Which of the following applies?

Correct Answer: C. Once a dishonesty is discovered, coverage is cancelled for that employee.

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Question 50: Which of the following is a federal law which protects the applicant in information collected about him/her?

Correct Answer: C. Fair Credit Reporting Act.

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Question 1: Under which of the following situations will an insured probably be considered to NOT have a liability to a claimant?

Correct Answer: B. The insured recklessly drives his/her car at an excessive rate of speed just barely missing the claimant, causing the claimant to become very upset and distressed.

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Question 2: Which of the following is NOT a party to a bond?

Correct Answer: C. Fiduciary.

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Question 3: Which of the following is or are formalized by the insured filling out the application and paying his initial premium and the insurance company issuing either a receipt or policy?

Correct Answer: B. Offer and Acceptance.

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Question 4: Our insured, Mr. Jordan, borrowed Mr. Ryan's brand new Corvette Stingray. Mr. Ryan was fully covered by Indemnity Insurance Company. Which of the following statements concerning Mr. Jordan's circumstances is true?

Correct Answer: C. Mr. Ryan's policy will pay first, Mr. Jordan's as excess.

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Question 5: When would Owners and Contractors Protective Liability coverage be appropriate?

Correct Answer: D. A building owner and/or contractor to protect against liability caused by injuries an independent contractor causes a claimant.

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Question 6: An insured has a liability policy with a limit of $50,000. If a loss of $15,000 occurs, the insurance company is NOT obligated to pay more than $15,000 because of the principle of?

Correct Answer: D. Indemnity.

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Question 7: Which of the following is NOT an example of Supplemental Payments?

Correct Answer: D. Cost of repairing the insured auto.

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Question 8: All of the following are excluded under a Commercial General Liability (CGL) policy EXCEPT?

Correct Answer: A. Liability assumed under a lease agreement.

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Question 9: Which of the following would NOT qualify as a theft?

Correct Answer: C. Something disappeared.

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Question 10: Ms. Emma Ace has a claims made Commercial General Liability (CGL) policy. Which of the following statements applies?

Correct Answer: C. The occurrence must occur while the policy is in effect.

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Question 11: Which of the following statements concerning Uninsured Motorists coverage is true?

Correct Answer: A. It will make a payment to the insured, the insured's spouse or a resident member of the insured's household, if they are injured by either a hit-and-run motorist or a uninsured motorist anywhere at anytime.

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Question 12: Which are limits of liability?

Correct Answer: B. It is the greatest amount which the insurance company will pay under one coverage as is expressed in the declarations page of the policy.

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Question 13: Which of the following coverages would you use primarily to cover property other than money and securities?

Correct Answer: C. Premises Theft and Robbery Outside the Premises coverage.

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Question 14: Which of the following would be classified as a burglary?

Correct Answer: C. Someone breaking a window to get into a store building.

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Question 15: Which of the following describes the probability or likelihood that a loss caused by covered peril will occur?

Correct Answer: B. Risk.

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Question 16: Which of the following statements concerning insurance is NOT true?

Correct Answer: C. Pooling of risk is a few people paying money in so that money can be paid out to many more than who paid in.

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Question 17: Ms. Emily, driving her car at an excessive rate of speed, runs a stop sign barely missing Ms. Julie, causing Ms. Julie to become very upset and distressed. Ms. Julie cannot make a liability claim because which of the necessary elements of liability is missing?

Correct Answer: B. Damages.

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Question 18: Which of the following statements concerning Towing and Labor coverage is true?

Correct Answer: D. It covers labor costs of repairing the auto at the roadside, but no repair costs incurred at a garage.

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Question 19: The insured is involved in an auto accident where both the insured and the driver of the other car are injured. Assuming all requirements are satisfied, which of the following coverages will pay for the insured's medical expenses?

Correct Answer: A. Medical Payments Coverage.

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Question 20: Which of the following statements describes Theft, Disappearance and Destruction coverage?

Correct Answer: C. It covers loss of money and securities outside the premises while in the custody of a messenger or armored car.

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Question 21: The Acme Corporation does NOT own any automobiles but does have its employees occasionally drive their own autos on company business. Which of the following coverages are appropriate in the Acme Corporation's circumstances?

Correct Answer: B. Employers Nonownership Legal Liability coverage.

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Question 22: Mr. Ryan James has a Commercial General Liability (CGL) policy. At the end of the policy year he has received a premium notice for the previous year. What would be the best explanation?

Correct Answer: B. Under the CGL policy, sometimes a deposit premium is charged at the beginning of the policy term, an audit is done at end of the policy term and an additional premium can be charged.

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Question 23: Which of the following is covered under Comprehensive (All Risk) Physical Damage Auto coverage?

Correct Answer: C. Glass breakage.

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Question 24: Which of the following is excluded under Comprehensive (All Risk) Auto Physical Damage coverage?

Correct Answer: D. Upset damage.

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Question 25: Which of the following statements accurately describes the concept of actual cash value coverage?

Correct Answer: A. The purpose of actual cash value coverage is to restore to the insured to the same economic value that he/she had in the property immediately before loss.

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Question 26: Commercial General Liability (CGL) coverage does NOT cover which of the following?

Correct Answer: C. Liquor Liability.

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Question 27: Which of the following describes a cause of loss which can be insured against?

Correct Answer: A. Peril.

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Question 28: Which of the following is NOT a necessary element to all legal contracts including insurance policies?

Correct Answer: C. Producer’s Commissions.

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Question 29: Ms. J. Jordan has a Commercial General Liability (CGL) policy. Which of the following will it NOT cover?

Correct Answer: C. Liability caused by discharge of pollutants.

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Question 30: Which of the following statements concerning the Supplemental Payments under Auto Liability coverage is true?

Correct Answer: D. Defense costs are covered under Supplemental Payments.

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Question 31: All of the following are automatically covered under an Auto Liability policy EXCEPT?

Correct Answer: C. Anyone other than a resident member of the named insured's household using the insured auto without an insured's permission.

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Question 32: Which of the following would NOT be covered under Contractual Liability coverage?

Correct Answer: B. Liability incurred as a result of breach of contract.

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Question 33: A bid bond does which of the following?

Correct Answer: D. Guarantees that a contractor will enter into a contract to do work if awarded the job.

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Question 34: What are typical limits for Medical Payment coverage?

Correct Answer: C. $5,000 per person, not to exceed $25,000 in aggregate.

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Question 35: Which of the following is NOT considered to be a personal auto?

Correct Answer: C. A delivery truck.

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Question 36: Mr. Ryan backed his car up in the parking lot into Ms. Julie's car. In which of the following situations would Mr. Ryan be considered to be negligent?

Correct Answer: D. Mr. Ryan failed to back his car up with all the care and caution that a reasonable person would under the circumstances.

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Question 37: Which of the following are excluded under Comprehensive (All Risk) Physical Damage coverage?

Correct Answer: A. Collision or upset.

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Question 38: Which of the following would NOT be covered under the Auto Liability coverage?

Correct Answer: C. Someone driving the insured vehicle without permission.

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Question 39: The insured is involved in an auto accident in which both the insured and the driver of the other auto incur injuries. Assuming all requirements are satisfied, which of the following coverages will pay for the injuries to the other driver?

Correct Answer: B. Bodily Injury Liability Coverage.

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Question 40: Which of the following is covered under Premises Burglary coverage?

Correct Answer: C. Loss caused by burglary.

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Question 41: Which of the following types of auto is NOT automatically covered for liability under a personal auto policy?

Correct Answer: D. An auto owned by the insured's employer regularly provided for the insured's use.

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Question 42: Which of the following is NOT a requirement for a claim to be covered under Products and Completed Operations coverage?

Correct Answer: A. The accident must occur on the insured premises.

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Question 43: Commercial Excess/Umbrella Liability coverage would apply in which of the following cases?

Correct Answer: A. It is needed by businesses which run the risk for any reason of having claims made against them in extraordinarily high amounts.

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Question 44: Which of the following is NOT an occurrence?

Correct Answer: C. A claims-made policy.

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Question 45: Which of the following statements concerning Employee Dishonesty coverage is true?

Correct Answer: D. The loss must occur while the bond is in effect and it must be discovered while the bond is in effect or during the discovery period.

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Question 46: Which of the following is NOT an accident?

Correct Answer: C. One person hitting another with his fist on purpose.

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Question 47: All of the following are necessary elements to constitute a legal contract EXCEPT?

Correct Answer: C. Declaration page.

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Question 48: Which of the following would be classified as a robbery?

Correct Answer: A. A stick-up.

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Question 49: Personal and Advertising Injury Liability coverage will cover which of the following?

Correct Answer: C. Mistakenly making a slanderous statement about a competitor.

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Question 50: All of the following are covered under Robbery and Safe Burglary coverage EXCEPT?

Correct Answer: D. Shoplifting.

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Question 1: Which of the following describes policy conditions?

Correct Answer: C. Policy requirements.

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Question 2: Which of the following describes a continuous, repeated exposure to conditions which result in injuries or damages?

Correct Answer: B. Occurrence.

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Question 3: Coverage C - Medical Payments of a Commercial General Liability (CGL) policy does which of the following?

Correct Answer: C. Covers medical bills resulting from accidents occurring on the insured premises resulting from the insured's operation.

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Question 4: Which of the following statements concerning Uninsured Motorist coverage is true?

Correct Answer: C. It pays for medical bills, lost wages, permanent injuries and all other sums for which the at-fault driver would have been responsible for had the at-fault driver had insurance.

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Question 5: A Surety Bond does which of the following?

Correct Answer: B. Guarantees a promise of faithful performance or payment.

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Question 6: Which of the following statements describes the legal concept of indemnity?

Correct Answer: A. It is the legal concept of one party standing in the place of another, such as an insurance company making good for an insured.

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Question 7: Which of the following are covered under Supplementary Payments of a Commercial General Liability (CGL) policy?

Correct Answer: C. Defense cost.

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Question 8: Which of the following describes shoplifting?

Correct Answer: C. Theft.

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Question 9: Which of the following expenses would typically be covered by an auto policy Medical Payments coverage?

Correct Answer: D. Ambulance bills incurred by a passenger of the insured vehicle.

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Question 10: Which is an example of negligence?

Correct Answer: C. The individual fails to do something he/she should have.

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Question 11: What is a deductible?

Correct Answer: C. An initial amount of loss which the insured must pay before the insurance company begins to indemnify.

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Question 12: Which of the following is NOT a party to a bond?

Correct Answer: D. Indemnity.

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Question 13: Which of the following would be considered covered automobiles under Auto Liability coverage?

Correct Answer: C. A rental car being driven while the insured auto is being repaired.

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Question 14: Which of the following would describe loss caused by order of civil authority?

Correct Answer: C. A moral hazard.

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Question 15: Which of the following describes proximate cause?

Correct Answer: D. An act directly causing damage to someone else’s property.

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Question 16: Which of the following is a form of insured contract (incidental contract) NOT covered under the Comprehensive General Liability (CGL) policy?

Correct Answer: C. Breach of contract liability.

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Question 17: Who is covered under Medical Payments coverage?

Correct Answer: C. Passenger while entering, riding in or alighting from the insured auto.

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Question 18: Who would buy an Employee Dishonesty policy?

Correct Answer: B. An employer who has employees who handle money for him/her.

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Question 19: Which of the following describes someone breaking into a store building to steal merchandise?

Correct Answer: A. Burglary.

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Question 20: Which of the following describes a sudden, unforeseen, unintended event?

Correct Answer: A. Accident.

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Question 21: Ryan James rents a carpet cleaner from Worldwide Rental Company. There is a defect in the carpet cleaner which causes Mr. James to be injured. The accident occurred at Mr. James' home. Which of the following would apply?

Correct Answer: A. This would be classified as off premises liability covered under Worldwide Rental Company's Comprehensive General Liability (CGL) policy.

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Question 22: Which of the following describes insurable interest?

Correct Answer: A. Being in a position where you would lose money should loss occur.

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Question 23: Which of the following are covered under Comprehensive (All Risk) Physical Damage coverage?

Correct Answer: C. Some transportation costs after the insured auto has been stolen for 48 hours.

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Question 24: Which of the following can be written to cover loss by robbery of a custodian or messenger or loss caused by safe burglary?

Correct Answer: C. Robbery and Safe Burglary coverage.

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Question 25: Which of the following would use Owners and Contractors Protective Liability coverage?

Correct Answer: D. Either a building owner or contractor on a building where construction work is being done.

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Question 26: Entertainment Enterprises Inc. is concerned that someone could get hurt at a concert that they promote. Which of the following would apply?

Correct Answer: A. Commercial Excess/Umbrella Liability coverage would cover claims that exceed their primary coverage limits.

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Question 27: Which of the following statements describes Supplemental Payments?

Correct Answer: C. Insured person’s defense cost.

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Question 28: Which of the following statements describes a hazard?

Correct Answer: C. A pothole in a business parking lot in which a customer can trip, fall and become injured.

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Question 29: Ms. Julie has a Personal Auto policy with limits of 100/300/50. What does this mean?

Correct Answer: D. The policy will pay up to a maximum of $350,000 for injuries caused to several people and also property damage.

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Question 30: Which of the following describes the clause in which the insurance company agrees to indemnify the insured?

Correct Answer: B. Insuring agreement.

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Question 31: Which of the following statements concerning Physical Damage Collision or Upset coverage is true?

Correct Answer: D. It covers damage caused by another vehicle colliding with the insured vehicle.

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Question 32: Which of the following is covered by a Commercial General Liability (CGL) policy?

Correct Answer: D. Liability assumed under a hold harmless lease agreement.

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Question 33: Which of the following is NOT covered under a Commercial General Liability (CGL) policy?

Correct Answer: A. Liability for breach of contract.

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Question 34: An insured who has an automobile policy with Collision coverage can recover for damages caused to his/her car in which of the following cases?

Correct Answer: B. The insured accidentally backed one of his two cars into the other.

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Question 35: Which of the following provides automatic coverage on a recently purchased third automobile when an insured already owns two autos which are insured by the same insurance company?

Correct Answer: A. Newly Acquired Auto coverage.

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Question 36: Which of the following is a peril?

Correct Answer: B. Theft.

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Question 37: Which of the following describes the part of the policy in which appears the name of the insured, all other parties at interest, a description of the property to be insured and the limits of liability?

Correct Answer: A. Declarations page.

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Question 38: Mr. Edwardo is covered under a Crash Mutual Auto Liability policy with limits of 25/50/20. Mr. Edwardo's precocious son, Sean, decides to use Mr. Edwardo's covered family auto, a Jaguar XJ6, without bothering to seek Mr. Edwardo's permission. While he was out driving his father's car, Sean hit Emily Ace, the town lawyer. Ms. Ace made a claim against both Sean and Mr. Edwardo for $25,000 for personal injuries and an additional $15,000 claim for damage to her car. Which of the following statements concerning the Edwardo's circumstance is true?

Correct Answer: A. Sean will be automatically covered for up to $25,000 for bodily injuries to Ms. Ace and up to $20,000 for damage to Ms. Ace's property since Sean is a resident member of the Edwardo household.

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Question 39: Which of the following covers money and securities both inside and outside the insured premises without any extra endorsements added?

Correct Answer: D. Theft, Disappearance and Destruction coverage.

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Question 40: Which of the following describes a Scheduled Employee Dishonesty policy?

Correct Answer: A. The loss must be caused by an identified employee.

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Question 41: Which of the following describes a stick-up?

Correct Answer: B. Robbery.

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Question 42: How is legal liability determined?

Correct Answer: A. It is often determined on the basis of what it is anticipated that a court would find if the claim were to go to a court hearing.

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Question 43: If the Commercial General Liability (CGL) policy is written on a claim made basis which of the following would apply?

Correct Answer: C. The occurrence must occur while the policy is in effect plus the claim must be made while the policy is in effect or within the claim reporting period following termination.

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Question 44: Which of the following provides automatic coverage when the insured trades a covered auto in for a new car and reports it 35 days after the end of the policy?

Correct Answer: D. No coverage.

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Question 45: For which of the following types of liability may a claimant make a claim against an insured under an auto policy?

Correct Answer: A. Bodily injury and property damage only.

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Question 46: Products liability coverage which is included under a CGL policy covers the extra high level of liability that a manufacturer or seller of a product has to make the product safe. Which of the following describes that principle of insurance?

Correct Answer: D. Strict liability.

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Question 47: Which of the following covers loss of property other than money and securities caused by theft inside the premises and robbery outside the premises?

Correct Answer: B. Premises Theft and Robbery Outside the Premises coverage.

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Question 48: Which of the following would usually be covered under auto Medical Payments coverage?

Correct Answer: C. All hospital and medical expenses incurred by a child of the insured incurred within one year of an accident in which the child was knocked off of a bicycle by a car.

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Question 49: Which of the following statements concerning Physical Damage coverage is true?

Correct Answer: D. First party coverage.

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Question 50: Physical Damage coverage does NOT automatically apply to which of the following?

Correct Answer: D. Another auto owned by the insured upon which the insured has other valid and collectible insurance.

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Question 1: Which of the following statements concerning a temporary insurance agreement is or are true?

Correct Answer: D. It is replaced at a later date with a permanent policy with no evidence of insurability.

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Question 2: Which of the following statements concerning a group insurance policy participation requirement is true'?

Correct Answer: C. Its purpose is to avoid adverse selection.

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Question 3: Which of the following is NOT a nonforfeiture option?

Correct Answer: B. Dividends.

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Question 4: Which of the following would an underwriter consider in evaluating an application?

Correct Answer: D. Parents' serious illnesses.

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Question 5: The Fair Credit Reporting Act protects which of the following applicant's rights?

Correct Answer: B. Right to be notified that there could be an inspection.

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Question 6: Ms. Celia stated on her life insurance application form that she was 28 years old. Her actual age was 30.Which of the following statements is true?

Correct Answer: B. The insurance company is allowed to reduce benefits to what it would normally pay for a person of the insured's actual age.

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Question 7: Which of the following statements concerning group insurance is true'?

Correct Answer: B. Each covered person is issued a certificate.

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Question 8: Which policy will have the highest premium rate?

Correct Answer: D. Endowment Insurance.

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Question 9: Which of the following is a type of plan that would typically be entered into between partners?

Correct Answer: B. Buy-Sell Agreement.

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Question 10: The Guaranteed Insurability provision allows which of the following?

Correct Answer: C. The insured may purchase additional amounts of insurance at specified intervals with no evidence of insurability.

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Question 11: Which of the following would NOT be a consideration in evaluating an application for life insurance?

Correct Answer: A. Family size.

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Question 12: If the policy owner is someone other than insured, which of the following requirements DOES NOT apply?

Correct Answer: C. The insured must be over age 18.

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Question 13: Mr. John purchased a life insurance policy November I. He committed suicide November 15 of the same year. Which of the following statements is true?

Correct Answer: B. The face amount benefit is not payable.

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Question 14: Which of the following describes a Buy-Sell agreement?

Correct Answer: B. It is a business agreement that provides for the surviving partner/stockholder of a business to buy out another at his/her death.

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Question 15: Which of the following statements concerning a Tax-Sheltered Annuity (TSA) plan is true?

Correct Answer: C. Only employees of non-profit education, religious or medical organizations are eligible.

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Question 16: Assuming the insured does NOT pay the premium with the application, when does a life insurance policy take effect?

Correct Answer: B. Upon delivery.

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Question 17: How may an annuity plan NOT be purchased?

Correct Answer: C. Without cash contributions.

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Question 18: Which of the following would NOT be a reason for purchasing Whole Life insurance?

Correct Answer: D. It provides the greatest amount of insurance possible at the lowest premium rate possible.

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Question 19: Which of the following annuity options would yield payments in a fixed amount each month until principal and interest are depleted?

Correct Answer: A. Fixed amount.

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Question 20: Which policy requires premium payments for the longest period of time?

Correct Answer: A. Whole Life insurance.

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Question 21: Which of the following plans is a Whole Life insurance policy with a Decreasing Term rider with benefits used to provide a family income?

Correct Answer: B. Family Income plan.

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Question 22: When does a life insurance policy take effect assuming that the insured paid the premium with the application?

Correct Answer: A. Upon completion of the application including the required physical exam.

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Question 23: A life insurance policy has an Aviation Exclusion. Which of the following statements is true?

Correct Answer: B. The insured will be covered while flying as a fare-paying passenger on United Airlines.

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Question 24: Mr. Joshua owns a Whole Life insurance policy. He wishes to borrow against it. Which of the following statements is true?

Correct Answer: A. He must pay the interest rate indicated in the policy or it will be added to the policy loan.

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Question 25: Which of the following statements concerning an Individual Retirement Account (IRA) is true?

Correct Answer: B. Any wage earner is eligible.

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Question 26: Which of the following statements concerning an IRA plan is true?

Correct Answer: B. Any wage earner qualifies.

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Question 27: Which of the following statements concerning Nonforfeiture options is true?

Correct Answer: B. If the Paid Up Insurance option is chosen, no further premium payments are necessary.

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Question 28: Which of the following statements concerning dividends is true?

Correct Answer: B. The owner has the right to choose the dividend option.

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Question 29: Which is NOT a right of ownership in a life insurance policy?

Correct Answer: A. Change irrevocable beneficiaries at will.

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Question 30: Who CANNOT be an owner of a life insurance policy?

Correct Answer: A. A disinterested third party that has no financial interest in the insured's life.

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Question 31: Why is it important to have a large group of individuals insured?

Correct Answer: A. According to the law of large numbers, the larger the group the more accurate actuarial statistical assumptions will become.

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Question 32: Which of the following is a characteristic of Term insurance?

Correct Answer: C. Insurance protection for a limited policy term

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Question 33: Which of the following describes a group of individuals who do NOT qualify for group insurance, who each individually apply for insurance and who each have a policy issued to them, but the program is administered by a sponsor'?

Correct Answer: D. Franchise (Wholesale) Group insurance.

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Question 34: Which of the following plans provides cash accumulation which varies according to a specified economic index and is intended to combat inflation?

Correct Answer: A. Variable annuity.

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Question 35: Which of the following statements concerning Social Security Death (Survivor) benefits is NOT true?

Correct Answer: D. Benefits will be paid to dependent children through age 22.

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Question 36: In which of the following ways could an insurance company rate up a policy?

Correct Answer: C. Charge a temporary surcharge.

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Question 37: Which of the following statements describes the Ten-Day Free Look provision?

Correct Answer: C. It gives the insured ten days from date of delivery to return the policy without premium charge for any reason.

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Question 38: Which policy will have the highest cash value build up?

Correct Answer: D. Endowment Insurance.

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Question 39: Which of the following provisions will waive premium payments on a juvenile policy if the premium payor dies before the insured child's age 25?

Correct Answer: A. Death of Payor benefit.

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Question 40: Which of the following statements concerning the Individual Retirement Account (IRA) plan is true?

Correct Answer: D. They can be set up through life insurance company annuity plans.

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Question 41: Which of the following is a purpose of naming a contingent beneficiary?

Correct Answer: A. To avoid having life insurance death benefits paid to the primary beneficiary's estate.

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Question 42: Which of the following objectives would a key employee life insurance plan accomplish?

Correct Answer: A. Provide a business operating cash at the death of a key executive.

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Question 43: Which of the following groups are eligible for group life insurance?

Correct Answer: C. Ten or more debtors of a creditor.

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Question 44: Which of the following statements concerning the Tax-Sheltered Annuity (TSA) plan is true?

Correct Answer: B. It can be established through a life insurance company annuity plan or mutual funds.

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Question 45: Which of the following is NOT a cost savings typically associated with group insurance'?

Correct Answer: A. Adverse selection.

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Question 46: Which of the following is NOT a common reason for buying Term insurance?

Correct Answer: C. Nonforfeiture options

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Question 47: Who must have insurable interest?

Correct Answer: B. The beneficiary if he/she is the policy owner.

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Question 48: Which clause states the method of premium payment?

Correct Answer: D. Premium Payment clause.

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Question 49: Mary Smith is considering buying life insurance. Which of the following is NOT a reason why she would want to purchase life insurance?

Correct Answer: D. To cover living expenses while disabled.

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Question 50: Which of the following is a financial interest which the policy owner must possess at the time that a life insurance policy is purchased?

Correct Answer: C. Insurable interest.

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Question 1: All of the following statements concerning a life insurance policy Entire Contract provision are trueEXCEPT?

Correct Answer: A. It states that the insured will not be covered for suicide during the first two years of the policy.

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Question 2: Which of the following statements concerning common life insurance policy provisions is NOT true?

Correct Answer: A. The policy owner has the right to surrender the policy and select a nonforfeiture option if the policy is a cash value policy.

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Question 3: All of the following statements concerning life insurance Settlement Options are true EXCEPT?

Correct Answer: A. The automatic settlement option, if the policy owner fails to select one, is lump sum.

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Question 4: Which of the following is NOT a tax advantage of a life insurance policy?

Correct Answer: A. There is no income tax on benefits paid at the insured's death.

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Question 5: Which of the following statements concerning life insurance policy loans is true?

Correct Answer: A. If the insured dies with an outstanding loan, the amount of the outstanding loan will be deducted from the proceeds of the policy.

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Question 6: Which of the following is a Dividend Option?

Correct Answer: A. Life Annuity.

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Question 7: The amount of payment from a life annuity is based on all of the following EXCEPT?

Correct Answer: A. The annuitant's health.

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Question 8: Which of the following statements concerning the underwriting of a life insurance policy applies?

Correct Answer: A. Paramedical examinations are always required.

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Question 9: When does a life insurance policy take effect?

Correct Answer: A. Only after the underwriter has reviewed and approved the application.

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Question 10: Mr. Harold Lloyd purchased a life insurance policy from High Risk Mutual Insurance Company. Mr. Lloyd inadvertently misstated his age. Instead of accurately reporting that his age was 42, he reported an age of 41. Which of the following would apply?

Correct Answer: A. Under the Misstatement of Age provision benefits would be reduced to the amount which the insurance company would have offered to a person of the insured's actual age for the premium rate which has been paid.

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Question 11: Mr. O'Casey has a IO-year Family Income rider attached to his Straight Whole Life insurance policy. Which of the following statements about his policy is true?

Correct Answer: A. Whenever Mr. O'Casey dies, no matter what his age is at his death, his beneficiary will receive benefits from the rider for ten years from the date of death.

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Question 12: All of the following groups are eligible for group insurance EXCEPT?

Correct Answer: A. Ten or more members of an association which was formed for some other purpose other than to obtain coverage on the lives of its members.

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Question 13: All of the following statements are true concerning the Premium Payment clause EXCEPT?

Correct Answer: A. It states the premium mode, that is the frequency with which the premium will be paid.

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Question 14: All of the following statements concerning Accidental Death benefits are true EXCEPT?

Correct Answer: A. They are paid only if the insured dies as a result of injuries sustained in an accident.

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Question 15: Which of the following is NOT a use for life insurance?

Correct Answer: A. Protect a family against loss of income should an income earner die prematurely.

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Question 16: Which of the following concerning a Whole (Straight) Life insurance policy is NOT true?

Correct Answer: A. It provides a level amount of coverage until the insured's age I00 maturity.

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Question 17: Which of the following concerning Term Life insurance is NOT true?

Correct Answer: A. Insurance coverage stops at the end of the policy term.

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Question 18: All of the following statements concerning a life insurance Policy Change provision are true EXCEPT?

Correct Answer: A. It states the insured's right to convert the policy to another policy with a higher premium rate without evidence of insurability.

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Question 19: Which of the following concerning life insurance is true?

Correct Answer: A. The policy owner must have an insurable interest at the time that the insured dies.

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Question 20: Agent Emily Caitlin has just convinced Mr. Ryan James of his need for a $50,000 life insurance policy. Ms. Caitlin informed Mr. James that he would need a physical examination. He replied that he did not want to make his initial premium payment until such time as she delivered the policy. Under this circumstance, when does the policy take effect?

Correct Answer: A. Upon delivery, with no other requirements applying.

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Question 21: All of the following statements concerning life insurance Policy Loan provisions are true EXCEPT?

Correct Answer: A. It is found in only permanent life insurance policies, that is cash value life insurance policies.

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Question 22: Mr. Harold Lloyd has had a Endowment at Age 65 Life insurance policy since he was age 30. The policy has a face amount of$50,000. Mr. Lloyd is now age 64 and the cash value in his policy is $49,000. Which of the following statements concerning Mr. Lloyd and his Endowment at Age 65 policy is NOT true?

Correct Answer: A. If he were to die right now, the policy would pay $50,000 to the beneficiary.

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Question 23: Which of the following statements concerning a Limited-Pay Whole Life insurance policy is true?

Correct Answer: A. Premiums can be increased or decreased within limitations specified in the policy.

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Question 24: Which of the following statements concerning life insurance is NOT true?

Correct Answer: A. It can be used to pay off debts that the insured still has outstanding at death such as mortgages, personal loans, credit obligations and business loans.

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Question 25: Ms. Anna failed to make her $500 annual premium payment on her Straight Whole Life insurance policy when it came due on January I two years ago. She has not made that premium payment since she has had a series of financial emergencies. Her circumstances, however, have changed to where she is now able to resume that policy. Which of the following statements is true?

Correct Answer: A. Most policies will allow for the reinstatement of the policy within three years.

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Question 26: Which of the following statements concerning the Waiver of Premium rider is true?

Correct Answer: A. There will be no increase in cash values while premiums are being waived.

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Question 27: Which of the following are true about a Family Life insurance policy and/or a Family Maintenance Life insurance policy?

Correct Answer: A. The Family Maintenance Plan provides life insurance coverage on more than one life.

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Question 28: Which of the following statements concerning an IRA Plan is true?

Correct Answer: A. It is an employer sponsored program.

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Question 29: All of the following are Dividend Options EXCEPT?

Correct Answer: A. Cash.

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Question 30: Which of the following statements concerning a life insurance policy assignment is true?

Correct Answer: A. The policy owner has the right to assign one or more rights in a policy to someone else.

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Question 31: Which of the following is NOT a life insurance policy Nonforfeiture Option?

Correct Answer: A. Cash.

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Question 32: Mr. Humphrey Bogardt has purchased a life insurance policy. Mr. Bogardt intentionally failed to disclose on the application that he has had Hodgkin's Disease. Which of the following statements concerning Mr. Bogardt's circumstances is true?

Correct Answer: A. Once the policy has been in effect for 180 days, the policy is incontestable, meaning the insurance company cannot deny the claim on the basis of the concealment on the application.

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Question 33: All of the following statements concerning a Modified Whole Life insurance policy are true EXCEPT?

Correct Answer: A. The Modified Whole Life insurance policy has complementing cash values and pure insurance protection with cash values equaling the face amount at maturity which is always age 100.

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Question 34: Which of the following statements concerning Decreasing Term Life insurance is NOT true?

Correct Answer: A. It provides decreasing pure life insurance protection starting at an initial face amount and gradually decreases over the period of its term so that at the end of the policy term it provides no protection.

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Question 35: Which of the following statements concerning Social Security Survivor benefits is true?

Correct Answer: A. Social Security will pay a lump sum benefit at a currently or fully insured individual's death if there is a qualifying survivor.

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Question 36: Which of the following statements about beneficiary designations is NOT true?

Correct Answer: A. The owner of the policy has the right to select a beneficiary unless an irrevocable beneficiary has been named.

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Question 37: Which of the following statements concerning group life insurance is NOT true?

Correct Answer: A. If a previously covered member dies within the 31 day conversion period before making the conversion it will be presumed that he/she intended to exercise his/her conversion right and the benefits, minus premium due, will be paid.

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Question 38: All of the following statements about the differences between an Endowment policy and a Straight Whole Life insurance policy are true EXCEPT?

Correct Answer: A. Cash values equal the face amount at maturity in both policies.

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Question 39: Mr. Ryan is contemplating a life insurance purchase. He is considering the relative merits of purchasing either a Straight Whole Life insurance policy, an Adjustable Life insurance policy, a Limited Pay Whole Life policy or a Universal Life insurance policy. Which of the following statements concerning the comparison of these four policies is true?

Correct Answer: A. The Straight Whole Life insurance policy will provide the most flexibility.

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Question 40: Which of the following statements describes Key Employee insurance?

Correct Answer: A. It provides for continuation of a business that is highly dependent upon one or a few key employees.

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Question 41: Which of the following statements concerning a buy-sell agreement is NOT true?

Correct Answer: A. It can be funded by each partner or stockholder in a business buying life insurance policies on all of the other partners or stockholders.

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Question 42: Which of the following statements concerning the Guaranteed Insurability rider is true?

Correct Answer: A. It provides the insured the option to purchase additional insurance.

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Question 43: All of the following statements concerning the Fair Credit Reporting Act are true EXCEPT?

Correct Answer: A. If an insurance company either rates up or denies coverage on the basis of an inspection report, the insurance company must advise the insured that the rating or rejection was based on an inspection report.

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Question 44: All of the following statements concerning life insurance policy provisions are true EXCEPT?

Correct Answer: A. Premium payments may be made to either an agent of an insurance company or an insurance company office.

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Question 45: Which of the following is NOT an annuity option?

Correct Answer: A. Fixed Amount (Amount Certain).

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Question 1: Which of the following describes a life insurance policy owner?

Correct Answer: C. The policy owner must be in a position of insurable interest only at the time the policy is purchased.

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Question 2: Which of the following statements concerning a 20 Year Endowment policy is true?

Correct Answer: C. If the insured dies prior to maturity, the policy will pay the face amount.

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Question 3: Which of the following statements concerning Group Life insurance is NOT true?

Correct Answer: D. If employees are to pay part of the premiums as in a contributory plan, then at least 50% of all eligible members must participate.

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Question 4: Mr. Elbroko has an Adjustable Life insurance policy. Mr. Elbroko is currently in a state of temporary financial emergency. He needs $1,000. Which of the following would apply?

Correct Answer: C. He could borrow against the policy.

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Question 5: All of the following statements about an Endowment policy are true EXCEPT?

Correct Answer: C. The policy matures at the insured's age 100.

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Question 6: Which of the following is NEVER excluded in a life insurance policy?

Correct Answer: D. Accidental Death.

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Question 7: All of the following about tax sheltered retirement (pension) plans are true EXCEPT?

Correct Answer: B. Contributions cannot be tax deducted.

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Question 8: Which of the following statements concerning Credit Life insurance is true?

Correct Answer: A. Credit Life insurance is Decreasing Term Life insurance used to pay the unpaid balance of an installment loan.

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Question 9: All of the following statements concerning the uses of life insurance are true EXCEPT?

Correct Answer: C. The cash values in a life insurance policy are never used to accumulate savings.

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Question 10: Mr. Green is married and has two children, Harold and Billy. The beneficiary designation on Mr. Green's life insurance policy reads, "Proceeds to be paid to Mrs. Green, wife of the insured, unless she precedes Mr. Green in death or dies as a result of the same accident, in which case benefits will be paid to Harold and Billy Green in like shares." Which of the following statements concerning Mr. Green's beneficiary designation is true?

Correct Answer: D. Mrs. Green is the primary beneficiary, Harold and Billy are contingent beneficiaries.

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Question 11: Miss Suzie's policy has a Grace Period in it. Which of the following statements concerning Miss Suzie's Grace Period is true?

Correct Answer: B. If the insured dies within the Grace Period without having made the premium payment, the entire face amount of the policy will be paid minus the premium that was due.

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Question 12: Which of the following statements concerning the maximum contributions to an Individual Retirement Account (IRA) or Tax Shelter Annuity(TSA) is true?

Correct Answer: D. Under both plans there are tax penalties for withdrawal prior to age 59 1/2.

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Question 13: Which of the following statements concerning a life insurance policy Settlement Option is true?

Correct Answer: C. The policy owner has the right to select the Settlement Option while the insured is still alive and, if the policy owner does not choose a Settlement Option while the insured is alive, the beneficiary can choose a Settlement Option at the insured's death.

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Question 14: All of the following statements about Group Life insurance are true EXCEPT?

Correct Answer: A. If a covered member who has been covered for 5 years becomes ineligible for coverage because of discontinuation of the plan, he or she may convert to an individual policy within 45 days of termination of the group plan.

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Question 15: Which of the following statements concerning a Whole (Straight) Life insurance policy is true?

Correct Answer: C. The insurance company assumes that it will earn interest on the cash values which is applied to the cost of the pure insurance protection.

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Question 16: Which of the following statements concerning a life insurance policy application is true?

Correct Answer: A. If the amount of insurance being applied for is great enough, the underwriter may require a paramedical examination as part of the application.

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Question 17: Which of the following describes a Family Maintenance Life insurance plan?

Correct Answer: B. It combines a Whole Life insurance policy with a Level Term rider.

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Question 18: Which of the following statements are true of Whole (Straight) Life, Limited Pay Whole Life, Modified Whole Life and Adjustable Life insurance?

Correct Answer: C. All four mature at age 100.

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Question 19: Which of the following statements concerning the reinstatement of a life insurance policy is true?

Correct Answer: C. A new suicide and incontestability period will apply.

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Question 20: All of the following statements concerning Guaranteed Insurability riders are true EXCEPT?

Correct Answer: C. The insured must provide evidence of insurability at each option date, and if he or she is not in good health, the policy will be rated.

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Question 21: Which of the following is NOT a life insurance underwriting factor?

Correct Answer: C. Nationality of applicant.

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Question 22: All of the following statements concerning a life insurance Automatic Premium Loan provision are trueEXCEPT?

Correct Answer: D. There is always an extra premium charge when the Automatic Premium Loan provision is included in the life insurance policy.

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Question 23: Which of the following is NOT true of a lapsed Whole Life policy with an Accidental Death benefit?

Correct Answer: D. The policy cannot be reinstated.

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Question 24: Which of the following is NOT a Settlement Option which the beneficiary of a policy can select?

Correct Answer: D. Paid up life insurance.

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Question 25: All of the following statements are true about a Variable Annuity EXCEPT?

Correct Answer: D. The insured is credited with a fixed amount when he or she contributes into the plan along with a variable interest rate while the insurance company is holding the money waiting for the insured to elect a pay out option.

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Question 26: A life insurance policy Insuring Agreement accomplishes which of the following?

Correct Answer: C. It states the insurance company's promise to pay to the insured's beneficiary at the insured's death.

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Question 27: Which of the following statements concerning Dividend Options is true?

Correct Answer: B. The owner has the right to select the dividend option and to receive the dividends.

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Question 28: Which of the following statements concerning a life insurance policy's provisions is NOT true?

Correct Answer: B. The Misstatement of Age provision states that if the insured intentionally misstates his/her age, benefits are not payable.

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Question 29: Which of the following statements about a noncontributory Group Life insurance policy covering 200 lives is true?

Correct Answer: C. Everyone who has met the eligibility requirements must be included in the plan.

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Question 30: Which of the following statements about Servicemens Group Life Insurance (SGLI) and Veterans Group Life Insurance (VGLI) is NOT true?

Correct Answer: C. Veterans Group Life Insurance is a 10 year group term insurance program which may be converted to individual permanent coverage at standard rates without evidence of insurability within that 10 year period.

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Question 31: Mr. Green owns a $25,000 20-Pay Whole Life insurance policy. Mr. Green has owned the policy for about 5 years. The policy has a cash value of$2,000. Which of the following would apply?

Correct Answer: C. It has $23,000 of pure insurance protection.

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Question 32: All of the following requirements must be met in order for a policy to take effect EXCEPT?

Correct Answer: B. An unconditional receipt must be issued.

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Question 33: Which of the following statements concerning Term Life insurance is true?

Correct Answer: A. Level Term Life insurance provides a level amount of pure insurance protection for a specified period of time.

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Question 34: When must a life insurance policy premium be paid?

Correct Answer: B. In advance of the period which is to be covered.

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Question 35: Mr. Harold Debonnaire is owner, founder and president of the Debonnaire Products Company. Mr. Debonnaire is concerned because he realizes that his entire business centers around him. The other executives and managers consult with him very frequently on most of the management details of the company. Mr. Debonnaire is afraid that if he were to die the business would incur a substantial loss of profits until someone was able to replace him. Which of the following statements about Mr. Debonnaire's situation is true?

Correct Answer: A. Key Employee insurance is a special life insurance program for Mr. Debonnaire's situation.

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Question 36: Which of the following describes Joint Life insurance?

Correct Answer: D. Benefits are paid at the first death of two insured people.

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Question 37: Which of the following federal laws pertains to inspection reports?

Correct Answer: D. The Fair Credit Reporting Act.

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Question 38: All of the following statements concerning policy changes are true EXCEPT?

Correct Answer: A. Most life insurance policies permit a change to an insurance plan costing a lower premium.

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Question 39: Which of the following is NOT a life insurance policy Nonforfeiture Option?

Correct Answer: B. Dividends.

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Question 40: All of the following statements about life insurance policy ownership are true EXCEPT?

Correct Answer: D. The policy owner cannot be the same as the insured person.

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Question 41: All of the following statements concerning the rating of a life insurance policy are true EXCEPT?

Correct Answer: D. Interest is not a factor in calculating premium rates.

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Question 42: Which of the following statements concerning an inspection report is NOT true?

Correct Answer: A. It is always done by the insurance company itself.

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Question 43: Mr. Jordan is contemplating the purchase of a Term Life insurance policy. Which of the following would apply?

Correct Answer: D. Term Life insurance provides no cash values for the policy owner to borrow against.

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Question 44: Greg Jones purchased a Juvenile Whole Life insurance policy on the life of his son, Greg Jones, Jr., Age 4. Greg Jones, Sr., is to be the premium payor and owner of the policy. Mr. Jones, Sr., is concerned that if he were to die, Greg Jones, Jr., may NOT be able to keep up his premium payments. Which of the following statements concerning Mr. Jones' situation is true?

Correct Answer: C. If Mr. Jones purchases a Death of Payor benefit on his son's policy, premiums would be waived at Mr. Jones' death until the child attains age 25.

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Question 45: Which of the following statements concerning a Suicide Clause is true?

Correct Answer: A. It provides that if the insured dies as a result of suicide within the first two years, the insurance company will be required to return the premiums that have been paid.

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Question 46: Which of the following describes a Family Income Life insurance plan?

Correct Answer: A. It is a Whole Life insurance policy with a Decreasing Term rider.

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Question 47: Ownership of a life insurance policy is important for all of the following reasons EXCEPT?

Correct Answer: C. The owner has the right to determine who is to be the beneficiary only if the beneficiary has an insurable interest.

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Question 48: Which of the following is not a common use for life insurance benefits?

Correct Answer: B. Pay household expenses while the insured is still alive.

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Question 49: Which of the following statements concerning a Family Life insurance program is NOT true?

Correct Answer: B. It usually provides a reduced amount of Whole Life insurance coverage on the spouse.

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Question 50: Which of the following statements concerning a life insurance conditional receipt is true?

Correct Answer: B. The coverage put into effect by a conditional receipt is of exactly the same form and amount as that provided by the policy which ultimately will replace the conditional receipt.

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Question 1: Which of the following express requirements that must be met?

Correct Answer: A. Conditions.

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Question 2: What is a purpose of the deductible clause?

Correct Answer: B. To reduce the insurance company's administrative expenses for small claims which the insured can afford him/her self.

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Question 3: In order to calculate the amount that an insurance company should pay on a coinsured policy, the insured needs to know all EXCEPT which of the following facts?

Correct Answer: C. The replacement cost of the building on the date the policy was purchased.

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Question 4: Which of the following policies are NOT classified as being named peril policies?

Correct Answer: D. Special cause of loss form.

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Question 5: Under a property insurance policy a mortgagee is given all of the following rights EXCEPT?

Correct Answer: B. To cancel the policy.

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Question 6: Which of the following would be covered under a Homeowners Condominium Unit Owners (HO 6) policy?

Correct Answer: D. Personal property owned by a condominium owner.

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Question 7: Which of the following describes a Personal Article floater?

Correct Answer: A. It contains a schedule.

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Question 8: Which of the following statements does NOT describe replacement cost coverage?

Correct Answer: C. Fair Market Value.

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Question 9: Which of the following statements describes a Special Cause of Loss form?

Correct Answer: B. It is all - risk (open peril) coverage.

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Question 10: Which of the following statements concerning package policies is true?

Correct Answer: B. They automatically protect various types of property all in one policy.

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Question 11: All of the following statements describe a Building and Personal Property policy EXCEPT?

Correct Answer: B. It automatically covers all broad form perils.

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Question 12: Mr. R. James has recently purchased a house which he has converted into three apartments. He does NOT intend to live in any of the apartments himself. Which of the following policies would be appropriate for him?

Correct Answer: A. A Dwelling policy.

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Question 13: Any possible cause of loss which can be insured against is called which of the following?

Correct Answer: D. Peril.

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Question 14: Which of the following are NOT covered by the National Flood Insurance program?

Correct Answer: D. Damage caused by subsidence caused by an unknown cause.

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Question 15: A property insurance policy Liberalization Clause does which of the following?

Correct Answer: D. Provides that if the insurance company changes its policies so as to provide broader coverage at no greater premium rate, the insured's policy will automatically be considered to be changed to provide the broader better coverage.

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Question 16: Which of the following clauses allows the insurance company to cancel coverage after the insured property has been left vacant 60 consecutive days?

Correct Answer: A. Vacancy and Unoccupancy clause.

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Question 17: Which of the following clauses entitles the insurance company to the insured's rights to make a claim against a third party to get part of the loss back?

Correct Answer: C. Subrogation clause.

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Question 18: Which of the following does NOT qualify as a dwelling building?

Correct Answer: C. A sixplex.

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Question 19: A Basic Cause of Loss form does NOT cover which of the following?

Correct Answer: C. Water damage.

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Question 20: Which of the following describes actual cash value?

Correct Answer: A. Replacement cost minus depreciation.

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Question 21: All of the following are requirements that a legal contract must meet EXCEPT which?

Correct Answer: D. Exclusions.

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Question 22: Which of the following provides all-risk coverage on buildings, broad form named peril coverage on personal property?

Correct Answer: C. Homeowners Special form (HO 3).

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Question 23: Which of the following describes the concept of insurance?

Correct Answer: A. A social device for the transfer of risk through the accumulation of funds.

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Question 24: Which of the following is optional and additional under the Dwelling Building and Contents Basic, Broad and Special policies?

Correct Answer: C. Personal property coverage.

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Question 25: Which of the following perils are covered under the Special Cause of Loss form?

Correct Answer: C. Discharge from a plumbing or heating pipe.

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Question 26: Which of the following is NOT a duty of the insured in a property insurance policy?

Correct Answer: D. Give the mortgagee notice of loss.

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Question 27: Which of the following would be used by the insured who rents his home?

Correct Answer: D. Homeowners Contents Broad form ( HO 4).

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Question 28: Which of the following concerning the Business Owners Policy (BOP) is NOT true?

Correct Answer: B. It is used for large businesses.

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Question 29: Which are items that the insurance company will pay for in addition to the policy limits on a Homeowner policy?

Correct Answer: D. Additional coverages.

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Question 30: Which of the following statements concerning a Broad Cause of Loss form is true?

Correct Answer: B. It will cover damage caused by a tree limb falling on a roof.

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Question 31: Which of the following provides broad form named peril coverage on buildings, outbuildings and personal property?

Correct Answer: B. Homeowners Broad form (HO 2).

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Question 32: Which of the following describes pure risk?

Correct Answer: D. A risk which can be insured against where there is only opportunity to lose should loss occur, no opportunity for gain.

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Question 33: Which of the following is NOT a peril covered under a Broad Cause of Loss form?

Correct Answer: A. Termite damage.

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Question 34: Which of the following is a federal law that protects an applicant with regard to information collected by the insurance company from outside sources?

Correct Answer: A. Fair Credit Reporting Act.

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Question 35: Which of the following is NOT an automatic extension included in a Building and Personal Property policy?

Correct Answer: D. Building coverage.

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Question 36: Which of the following is the legal concept of the insurance company reimbursing the insured for a covered loss only to the extent of the loss?

Correct Answer: D. Indemnity.

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Question 37: Ms. Emily Caitlin has a home with an $80,000 fair market value. The replacement cost of her home is $120,000. She has a $72,000 Homeowners 3 policy with an 80% coinsurance clause and a $100 deductible. If she were to incur a $20,000 fire loss, how much would the insurance company be required to pay?

Correct Answer: A. $14,900.

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Question 38: Frayed wiring is which of the following?

Correct Answer: C. A hazard.

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Question 39: Which of the following statements concerning a property insurance policy coinsurance clause is NOT true?

Correct Answer: D. If the insured is properly insured to value at the time that the policy is purchased, total losses will be fully covered.

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Question 40: Which of the following describes Farmowners Package Policies?

Correct Answer: C. It is a package policy that packages together both property insurance and casualty insurance risks that would apply to farms.

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Question 41: Which of the following are usually NOT insured for actual cash value?

Correct Answer: A. Buildings.

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Question 42: Which of the following is a type of property which is mostly indirect value which is excluded under most property insurance policies?

Correct Answer: C. Valuable papers and bookkeeping records.

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Question 43: Which of the following is applicable in a situation where there is concurrent insurance?

Correct Answer: A. Pro rata liability clause.

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Question 44: Mr. Ryan James has an all risk property insurance policy. Which of the following statements best describes it?

Correct Answer: A. It covers all risk or perils except those specifically excluded.

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Question 45: Which of the following statements concerning an Extra Expense form is true?

Correct Answer: D. It covers the cost of an insured subcontracting some of his/her normal work to another firm while the insured building is untenable as a result of a covered peril.

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Question 46: Which of the following statements describes insurable interest?

Correct Answer: C. An insurance company is not required to reimburse an insured for a loss if the insured does not possess insurable interest at the time loss.

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Question 47: Which of the following endorsements cover loss of earnings of a business while it is shut down to remodel and restock because of a covered peril?

Correct Answer: D. Business Income endorsement.

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Question 48: Which of the following are parts of an insurance policy?

Correct Answer: D. Declarations page.

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Question 49: The Ryan James residence has a $100,000 replacement cost. It is insured by a $50,000 Homeowner 3 policy which has an 80% coinsurance clause and a $100 deductible. In the event of a total loss to the house, how much will the insurance company pay?

Correct Answer: A. $50,000.

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Question 50: Which of the following is NOT a peril covered under a Basic Cause of Loss form?

Correct Answer: B. Weight of ice, snow and sleet.

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Question 1: Which of the following is NOT a requirement of the National Flood Insurance program?

Correct Answer: A. The property being proposed for insurance must be on a body of water.

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Question 2: Which of the following policies would Ms. Emma Ace use to insure the condominium that she just recently purchased?

Correct Answer: C. Homeowners (H. O.) 6.

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Question 3: All of the following are requirements that always apply at time of loss EXCEPT which?

Correct Answer: D. Under all policies the insurance company must always replace the damaged property with a new, like item.

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Question 4: A fire burned a hole in the ceiling of a hotel room. There was charring around the hole and smoke damage throughout the room. The cost of repairing and restoring the hotel room would be classified as which of the following?

Correct Answer: A. Direct loss.

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Question 5: What is insurance?

Correct Answer: A. It is a social device for the transfer of risk through the accumulation of funds.

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Question 6: Which of the following is a peril covered under most fire (property) insurance policies?

Correct Answer: D. Damage caused by a hostile fire.

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Question 7: Which of the following is NOT found in the policy exclusions of a property insurance policy?

Correct Answer: D. The policy takes effect at 12:01 a.m.

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Question 8: If a fire policy has a Vacancy and Unoccupancy clause but does NOT have a Vacancy and Unoccupancy Permit added, the insurance company can take which of the following actions?

Correct Answer: B. Terminate coverage after the building has been vacant 60 consecutive days.

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Question 9: The E. Ace Company warehouse building has a replacement cost of $100,000. It is insured under a $90,000 property insurance policy which has an 80% coinsurance clause and a $200 deductible. There is $10,000 damage to the building. How much should the insurance company pay?

Correct Answer: B. $ 9,800

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Question 10: Mr. R. J. Ryan has a property insurance policy on his building. He would like to verify the effective date and limits of liability on his policy. In what part of the policy should he find those items?

Correct Answer: A. Declarations page.

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Question 11: After a fire loss the insured may be required to do which of the following?

Correct Answer: A. Separate the damaged property from the undamaged property and allow the insurance company to inspect the undamaged property as well as the insured's books and records.

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Question 12: A policy which will protect the insured against all perils except those specifically excluded in the policy is called which of the following?

Correct Answer: D. Special (all risk) coverage.

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Question 13: Which of the following types of property would qualify for coverage under a Building and Personal Property form?

Correct Answer: A. An office building.

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Question 14: Mr. Ryan has a $50,000 Homeowner 3 policy. Mr. Ryan has a total loss in which his building, his detached garage and all the contents are completely destroyed and Mr. Ryan and his family are required to live at a temporary rented apartment for three months. You can assume that Mr. Ryan is fully insured to value. Assume no deductible applies. Which of the following statements concerning Mr. Ryan's coverage for this loss is or are true?

Correct Answer: B. Mr. Ryan's contents and additional living expenses will be covered for up to $40,000, in addition to the $50,000 limits on the building.

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Question 15: Vandalism and Malicious Mischief (V, M and M) coverage excludes which of the following?

Correct Answer: B. Vandalism coverage after the premises have been left vacant 30 consecutive days.

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Question 16: The Basic Cause of Loss form will cover all of the following EXCEPT?

Correct Answer: D. Damage caused by weight of ice, snow and sleet.

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Question 17: Where would an insured go in his/her policy to find requirements that must be met at time of loss?

Correct Answer: C. Policy conditions.

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Question 18: Which of the following is an example of a peril?

Correct Answer: C. Windstorm.

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Question 19: Which of the following statements concerning an insurance risk is NOT true?

Correct Answer: C. It cannot be estimated by actuarial tables.

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Question 20: Which of the following describes the Extra Expense endorsement?

Correct Answer: D. It protects an insured against the extra expense of continuing to do business during a restoration period.

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Question 21: Which of the following statements concerning Section 1 coverage limits under a Homeowner policy is NOT true?

Correct Answer: D. Additional living expenses (Coverage D) are always covered for 10% of Coverage A.

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Question 22: Ms. Emily is applying for insurance on her residence. It is a modern, well built residence located in an urban area. She should consider all of the following EXCEPT which?

Correct Answer: B. Personal property is usually insured for replacement cost without additional premium.

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Question 23: In which of the following situations does an insurable interest exist?

Correct Answer: A. A person who owns a house.

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Question 24: Which of the following is NOT a requirement of a legal contract?

Correct Answer: B. Covered perils.

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Question 25: A Homeowner policy can be used for which of the following?

Correct Answer: A. An owner occupied single family dwelling.

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Question 26: Ms. Julia applied for a property insurance policy on her office building. The insurance company hired an outside firm to check out the building, verifying its value, use and to see how it was maintained. Which of the following does apply?

Correct Answer: C. If she is rated up or denied due to an inspection report, she must be advised that the rating or rejection was based on an inspection and she has to be given the name and address of the inspection reporting organization.

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Question 27: At the time that an insurance company pays a claim it is reimbursing the insured for a loss he/she has sustained. What is this concept called?

Correct Answer: B. Indemnity.

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Question 28: The Business Owners Policy (BOP) and Commercial Package Policy (CPP) can cover all of the following EXCEPT?

Correct Answer: C. Damage to the building owner’s personal dwelling.

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Question 29: Which of the following coverages would NOT apply to a Dwelling Building and Contents Basic form?

Correct Answer: B. Coverage B – Other Structures coverage - 10% of Coverage A optional, additional.

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Question 30: Our insured, Mr. Humphrey Bogart, has a next door neighbor by the name of Mr. Broderick Crawford. One night Mr. Crawford was having a party. He was in his back yard talking to his friends, having a good time while barbecuing. Mr. Crawford was having such a good time that he did not notice the fire in his barbecue grill had exceeded the barbecue grill and was igniting the house. Neither did he notice that the fire was beginning to spread at a very rapid rate. When Mr. Crawford became aware of the fire he panicked and did not take immediate remedial action, waiting several minutes before alerting the fire department and did not think to warn his neighbor, Mr. Bogart, that the fire had spread to his property. Mr. Bogart has several thousand dollars damage to his property. Which of the following would be the best course of action for Mr. Bogart to pursue?

Correct Answer: D. Mr. Bogart can make a claim against his own Homeowner insurance policy and let his insurance company subrogate against Mr. Crawford.

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Question 31: Which of the following are covered under Section 1 of the Homeowners policy?

Correct Answer: D. Damage caused by a non-listed peril caused while the insured property was being removed from the insured premises to avoid damage caused by covered peril.

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Question 32: Mr. Ryan had a chair destroyed by fire. Mr. Ryan's Homeowners policy covered personal property for actual cash value. The chair which had a useful life of ten years was two years old. The original cost of the chair was $75, but it would have cost $100 to buy a new chair like it at the time it was destroyed. Assuming his deductible has already been satisfied, how much should the insurance company pay for the chair?

Correct Answer: B. $80

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Question 33: All of the following coverages apply to both the Dwelling Building and Contents Broad and Special form policies EXCEPT?

Correct Answer: D. Coverage D –Rental Value - Automatic, additional coverage.

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Question 34: Which of the following will cover damage caused by scorching where there is NOT a fire?

Correct Answer: C. Special (all risk) cause of loss form.

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Question 35: Which of the following is classified as a mortgagee?

Correct Answer: B. Lender.

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Question 36: Which of the following will cover smoke damage where there is NOT a hostile fire?

Correct Answer: B. Broad cause of loss form.

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Question 37: Which of the following is a peril covered by the broad cause of loss form but NOT the basic cause of loss form?

Correct Answer: A. Damage caused by accidental discharge from a plumbing system.

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Question 38: Ms. E. A. Ace has had fire damage to her building. The insurance company has paid her claim. Which of the following statements describes the insurance company's subrogation rights?

Correct Answer: B. The insurance company acquires the insured's rights to take legal action against third parties to recover its losses.

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Question 39: Which of the following properties could be covered under a Dwelling Building and Contents Broad form?

Correct Answer: A. A single family rental property.

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Question 40: Which of the following describes the insurance principle of the law of large numbers?

Correct Answer: B. The more people an insurance company insures the more precise the insurance company can be in calculating their premiums.

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Question 41: Which of the following covers the least number of perils commonly insured under property insurance policies?

Correct Answer: A. Basic cause of loss form.

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Question 42: Ms. J.J. Jordan owns a home with a replacement value of $60,000. Its fair market value is $40,000. The house originally cost $25,000 to build. It is insured under a Homeowners policy with an 80% coinsurance clause, a face amount of $32,000 and a $500 deductible. There is $24,000 damage to the house. How much should the insurance company pay?

Correct Answer: D. $15,500

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Question 43: The Arbitration (Appraisal) clause of a fire insurance policy does NOT state which of the following?

Correct Answer: C. The insured must accept the settlement offered by the insurance company.

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Question 44: Which of the following are covered under Homeowners Coverage E - Liability coverage?

Correct Answer: C. Liability rising out of a 10 h.p. motor boat.

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Question 45: Which of the following describes the limits of liability of a property insurance policy?

Correct Answer: B. Amount carried.

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Question 46: Which of the following statements describe Homeowner insurance coverage on jewelry?

Correct Answer: D. The Personal Article floater protects jewelry all risk worldwide.

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Question 47: Which of the following does NOT describe the Liberalization clause of a fire insurance policy?

Correct Answer: B. It provides for an increase in premiums.

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Question 48: Which of the following policies should Mr. Sean Jordan use to insure the new apartment that he just rented?

Correct Answer: B. Homeowners (H. O.) 4.

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Question 49: Which of the following coverages is an additional coverage under the Building and Personal Property form?

Correct Answer: C. Personal property of the insured.

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Question 50: All of the following is true concerning a property insurance coinsurance clause EXCEPT which?

Correct Answer: A. Loss adjustment is based on the value of the building at the time policy is purchased.

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Question 1: Which of the following is covered under Homeowner Liability coverage?

Correct Answer: D. Bodily injuries and property damage.

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Question 2: A Homeowner policy additional coverages covers all of the following EXCEPT?

Correct Answer: A. Damage to the dwelling building.

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Question 3: Which of the following would apply when the insurance company pays the cost of building a new building when a ten year old one is totally destroyed?

Correct Answer: C. Replacement cost.

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Question 4: Our insured, Mr. S. Jordan, carries a fire insurance policy with the face amount of $100,000. The policy has a 80% coinsurance clause. On the date of loss the replacement value of the building is $160,000. If there were to be total loss to the building, what is the maximum amount that the insured will be able to collect?

Correct Answer: B. $100,000.

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Question 5: An insured purchased a new building ten years ago for $50,000. It would cost $100,000 to rebuild the building new today. The building has depreciated at a rate of $2,000 per year. The building's present actual cash value is how much?

Correct Answer: B. $80,000.

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Question 6: Which of the following is a purpose of the coinsurance clause?

Correct Answer: B. Encourage the insured to fully insure property to value.

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Question 7: Negligence would occur under which of the following circumstances?

Correct Answer: C. An insured fails to do what a reasonable and prudent person would do and another person is injured.

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Question 8: A scheduled Personal Article floater added to a Homeowner policy can provide all of the following EXCEPT?

Correct Answer: D. Blanket coverage.

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Question 9: Which of the following would be found in a property insurance policy's conditions?

Correct Answer: D. The insured's responsibilities.

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Question 10: Extra Expense coverage covers which of the following?

Correct Answer: B. The additional cost of continuing business after a loss.

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Question 11: An insurance policy appraisal (arbitration) clause determines which of the following?

Correct Answer: B. Amount of damage.

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Question 12: A Building and Personal Property policy automatically includes which of the following extensions of coverage?

Correct Answer: D. Newly acquired property.

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Question 13: A Building and Personal Property policy can cover all of the following types of property EXCEPT?

Correct Answer: A. Growing crops.

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Question 14: A pair of antique vases are insured under a Homeowner Personal Article floater for $2,000. One of the vases is destroyed by a airplane sonic boom. The remaining vase is worth $200. Assuming that there is no deductible that applies, how much will the insurance company pay?

Correct Answer: C. $1,800.

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Question 15: What is one of the purposes of an insurance policy deductible?

Correct Answer: C. Eliminate small claims.

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Question 16: Ms. J. J. Jordan has furs and jewelry which have a replacement value in excess of $50,000. Which of the following coverages should she have?

Correct Answer: B. Any Homeowner policy with a Personal Articles floater added.

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Question 17: Ms. Emma Ace owned a house that was valued at $50,000. The house was totally destroyed. She had it insured for $60,000. What concept of insurance would be violated if the insurance company paid her $60,000?

Correct Answer: A. Indemnity.

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Question 18: Ms. J. J. Jordan has a Dwelling Building and Contents Broad form policy. Coverage D - Rental Value has a limit of $10,000. Which of the following statements apply to Coverage D - Rental Value?

Correct Answer: D. Optional Additional.

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Question 19: A Homeowner (H.O.) 2 policy Coverage C - Personal Property coverage sets special limits on all of the following items EXCEPT?

Correct Answer: B. Furniture.

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Question 20: Mr. and Mrs. R. James have a home which is insured under a Homeowner (H.O.) 3 policy with Coverage A - Building in the amount of $100,000. Which of the following losses would be covered under the policy?

Correct Answer: C. Mr. James' golf clubs are destroyed by a fire in his garage.

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Question 21: Which of the following must the insured do after suffering a property loss?

Correct Answer: B. Take steps to prevent further loss.

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Question 22: A Boat (Pleasure Craft) endorsement to a Homeowner policy would pay for which of the following losses?

Correct Answer: A. A boat motor is stolen.

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Question 23: The J. Ryan Office Supply Corporation carries a $100,000 insurance policy on a storage building. There is a $50,000 mortgage on the building indicated on the policy declaration page. An explosion destroys the entire building. What is the maximum that the mortgagee can recover?

Correct Answer: C. $50,000

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Question 24: Exclusions exist in insurance policies for which of the following reasons?

Correct Answer: C. To eliminate coverage for uninsurable perils.

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Question 25: All of the following make a property insurance policy a contract of indemnity EXCEPT?

Correct Answer: A. Liberalization clause.

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Question 26: An insurance company is obligated to do which of the following under the terms of a property insurance policy?

Correct Answer: A. Pay covered losses.

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Question 27: Subrogation would apply after which of the following?

Correct Answer: A. An insured collects from his/her insurance company for damage caused by a third party.

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Question 28: Homeowner policy Personal Liability coverage will cover which of the following?

Correct Answer: D. The insured causes bodily injuries to another golfer on a golf course by accidentally hitting him/her with a misdirected golf shot.

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Question 29: An application for Homeowner insurance is denied because of a consumer report. Under the provisions of the Fair Credit Reporting Act, the applicant does NOT have which of the following rights?

Correct Answer: D. To require the insurance company to send a copy of the report to the insured.

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Question 30: Mr. S. Jordan insures his television repair shop under a Building and Personal Property policy with Coverage A limits of $100,000, and Coverage B - Personal Property limits of $50,000. A fire causes $10,000 damage to the building and $20,000 damage to personal property. Mr. Jordan has to pay $1,000 for the removal of the fire debris in addition to the damage. His policy has a $100 deductible. How much should the insurance company pay assuming Mr. Jordan is fully insured to value?

Correct Answer: B. $30,900.

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Question 31: Which of the following describes an insured's loss when replacement cost is reduced by depreciation?

Correct Answer: B. Actual cash value.

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Question 32: The National Flood Insurance Program will NOT cover which of the following?

Correct Answer: D. Landslide damage caused by something other than inundation by water.

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Question 33: A newspaper has a fire in its pressroom. There is damage to the press. Which of the following coverages will cover the extra cost of hiring an outside firm to print the newspaper for them while the press is being fixed?

Correct Answer: B. Extra Expense coverage.

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Question 34: Under a property insurance policy coinsurance clause, the adjustment (settlement) is equal to which of the following?

Correct Answer: A. Amount carried divided by amount required times loss.

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Question 35: Which of the following best describes the concept of risk?

Correct Answer: B. Uncertainty of loss.

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Question 36: Ms. Emma Ace has her home insured under a Homeowner (H.O.) 3 policy with Coverage A in the amount of $100,000. Her property is insured to value. If she has a $15,000 fire loss to her detached garage, assuming no deductible applies, how much will the insurance company pay?

Correct Answer: C. $10,000.

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Question 37: Homeowners policies EXCLUDE which of the following under Section I?

Correct Answer: D. Nuclear reaction.

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Question 38: Insurable interest must exist at what time?

Correct Answer: D. At the time of loss.

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Question 39: The plumbing in Ms. J. J. Jordan's home broke and the ceilings were damaged by water. The damage will be covered under all of the following Homeowners policies EXCEPT?

Correct Answer: A. Homeowners (H.O.) 1 policy.

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Question 40: Which of the following provides that the insured must be given a privacy notice and notice that he/she can refuse to have confidential information disseminated to others?

Correct Answer: D. Gramm-Leach-Bliley Act/Privacy act.

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Question 41: Without additional premium, which of the following is used to determine the amount of loss to personal property under a Building and Personal Property policy?

Correct Answer: B. Actual cash value.

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Question 42: Which of the following would require a change in a Homeowner policy?

Correct Answer: C. A change of mailing address.

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Question 43: A dead tree limb hanging over a roof of a house represents which of the following?

Correct Answer: A. Hazard.

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Question 44: Which of the following would automatically be covered under a Homeowner (H.O.) 3 policy?

Correct Answer: D. A driveway damaged by a falling object.

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Question 45: Mr. R. James is fully insured to value under a Homeowner policy which has an 80% coinsurance requirement. Assuming no deductible applies, if he were to suffer a partial loss to his building, the insurance company would pay which of the following percentages?

Correct Answer: C. 100%.

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Question 46: The Declarations page of a property insurance policy would tell the insured which of the following?

Correct Answer: D. Effective date and expiration date of policy.

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Question 47: A Homeowner (H.O.) 2 policy is issued with $100,000 coverage on the building. What amount of coverage automatically applies to additional living expenses if the insured residence is damaged by covered peril?

Correct Answer: C. $30,000.

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Question 48: Which of the following types of property would NOT be covered under Coverage A - Building coverage under a Building and Personal Property policy?

Correct Answer: C. A window air conditioner.

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Question 49: Which of the following does NOT describe both the Commercial Package Policy (CPP) and the Business Owners Policy (BOP)?

Correct Answer: D. Both automatically cover damage caused by nuclear contamination.

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Question 50: Which of the following statements concerning Homeowner Medical Payments coverage is NOT true?

Correct Answer: A. It protects the insured and all members of his/her household if injured anywhere on the insured premises.

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Question 1: Which of the following statements concerning an Insurance Producer license is true?

Correct Answer: C. It is issued to the individual's resident address.

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Question 2: According to the state Insurance regulations, an insurance company can contest a health insurance claim only due to fraud after the policy has been in effect how long?

Correct Answer: B. 2 years.

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Question 3: Which of the following acts does NOT require an Insurance Producer license?

Correct Answer: B. Being a Public Adjuster.

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Question 4: Which of the following must participate in the Illinois Insurance Guaranty Fund?

Correct Answer: D. All Illinois admitted companies.

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Question 5: All of the following are penalties that could apply for failure to properly maintain a Premium Fund Trust Account EXCEPT which?

Correct Answer: D. Class X Felony.

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Question 6: A Premium Fund Trust Account can be maintained in which of the following types of accounts?

Correct Answer: B. An Illinois bank account.

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Question 7: Which of the following is a requirement of the Advertising of Accident and Sickness Insurance regulation?

Correct Answer: D. Special awards such a "safe drivers' award" cannot be used in connection with accident and health policies.

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Question 8: Which of the following are NOT required to be licensed?

Correct Answer: A. Employers who administer their own employee benefit programs.

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Question 9: Which of the following constitutes misappropriation of premium money?

Correct Answer: D. Failing to keep proper records on premium monies.

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Question 10: Which is the penalty for an insurance company NOT giving the State Insurance Director proper notice of termination of a license when required?

Correct Answer: B. Civil penalty to the insurance company of up to $1000 per violation.

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Question 11: All of the following describe controlled business EXCEPT?

Correct Answer: C. All of the insurance a person sells is to customers other than family, employees or a personally owned business.

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Question 12: Which of the following statements concerning Medicare Supplement insurance is NOT true?

Correct Answer: A. Private Medicare Supplement insurance policies do NOT require state Department of Insurance approval.

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Question 13: A Premium Fund Trust Account DOES NOT require which of the following records?

Correct Answer: C. Petty cash disbursements.

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Question 14: Which of the following describe a Temporary Insurance Producer license?

Correct Answer: C. It allows an individual new to insurance sales to go out, start making sales and start earning commissions prior to having passed the written examination.

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Question 15: When can an insurance company, Insurance Producer or Business Entity be financially examined by the State Department of Insurance?

Correct Answer: B. All insurance companies must submit annual financial statements to every State Department of Insurance where they are licensed.

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Question 16: Which of the following describes brokering?

Correct Answer: A. An Insurance Producer arranges coverage for a client through an insurance company with which the producer does not have an agency contract.

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Question 17: Which of the following is NOT a procedure which must be followed by the state Insurance Director when suspending or revoking a producer license?

Correct Answer: C. If a hearing is requested, the Insurance Director must give the insurance producer at least 45 days written notice of the hearing.

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Question 18: Who would qualify for an Illinois Non-Resident producer license?

Correct Answer: C. An individual who resides in Kentucky and is licensed as an insurance producer in Kentucky who wants to sell insurance in Illinois.

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Question 19: The State Minimum Standards rule does which of the following?

Correct Answer: D. Details policy provisions which all individual Accident/Health policies must include.

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Question 20: To whom does a producer owe a fiduciary responsibility?

Correct Answer: B. The insurance company.

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Question 21: An Insurance Producer has been convicted of a felony crime. Which of the following statements apply?

Correct Answer: A. The Insurance Producer must report the felony conviction to the State Insurance Director.

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Question 22: Mr. R. Bear, an Insurance Producer, has been caught giving a rebate to a client, Ms. E. Caitlin. All of the following penalties apply EXCEPT?

Correct Answer: C. Penalties can be assessed only to the insurance producer, not to the customer.

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Question 23: Which of the following is NOT an Insurance Producer education requirement?

Correct Answer: A. 25 hours of Pre-License Education.

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Question 24: Which of the following describes a stock insurance company?

Correct Answer: C. A company owned by stockholders.

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Question 25: What is the title of the state official primarily in charge of regulating insurance companies, Insurance Producers and Registered Firms?

Correct Answer: A. Director of Insurance.

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Question 26: Which of the following is NOT a quality needed to qualify as a professional?

Correct Answer: D. High income.

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Question 27: When must a change of address be reported?

Correct Answer: B. A change of address must be reported within 30 days.

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Question 28: Which of the following does NOT describe brokerage?

Correct Answer: C. Selling stocks, bonds and real estate in addition to insurance.

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Question 29: The State Insurance Director has decided to examine an Insurance Producer. All of the following are procedures that must be followed EXCEPT?

Correct Answer: C. If the state Department of Insurance examiner writes a report to the Director a copy does not have to be sent to the person examined.

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Question 30: Which of the following must be disclosed in an Accident and Health insurance policy advertisement?

Correct Answer: A. Whether the insurance company can refuse to renew, cancel or terminate the policy.

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Question 31: Who applies for a Business Entity license?

Correct Answer: B. An authorized member.

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Question 32: Which of the following is NOT an Insurance Producer license qualification?

Correct Answer: D. The producer must sell only controlled business.

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Question 33: What is the Insurance Producer Administrative fund?

Correct Answer: D. It is a fund that the State Department of Insurance maintains for license fees received.

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Question 34: Mr. Ryan James is an insurance company underwriter who is NOT involved in solicitation or negotiation of policies. Which of the following applies?

Correct Answer: A. He is not required to be licensed.

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Question 35: To whom may a Temporary Insurance Producer in Case of Death, Disability or Military Service license be issued?

Correct Answer: D. The widow of a deceased Insurance Producer who has never taken the state examinations.

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Question 36: All of the following are considered to be a form of advertisement by the Advertising of Accident and Sickness Insurance Regulation EXCEPT?

Correct Answer: C. Rebating.

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Question 37: Which of the following statements concerning the advertisement of Accident and Health insurance is NOT true?

Correct Answer: C. If the person who is making a testimonial is being paid or has a financial interest in the insurance company it does NOT have to be disclosed.

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Question 38: Which of the following does NOT have a fiduciary responsibility to the insurance company in handling premium monies?

Correct Answer: A. Insured.

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Question 39: To whom may commissions NOT be paid?

Correct Answer: A. An employee of a Business Entity who did not hold a license for the class of insurance at the time the policy was sold.

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Question 40: Which of the following describes altruism?

Correct Answer: D. Unselfishness.

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Question 41: Which of the following is a Limited Lines Producer license requirement?

Correct Answer: B. The person must be trustworthy, competent and of good business reputation.

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Question 42: In which of the following circumstances would an insurance company be required to report the circumstances concerning the termination of a producer's agency contract?

Correct Answer: D. The producer was caught misappropriating premium monies from customers.

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Question 43: What is the fee for a Temporary Insurance Producer license?

Correct Answer: D. $ 50 one time.

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Question 1: An insurance company terminated a producer's agency contract because the producer was caught misappropriating premium monies. The insurance company failed to report this to the State Insurance Director. What penalties may apply?

Correct Answer: B. A civil penalty to the insurance company.

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Question 2: Which of the following is a Limited Lines Producer license requirement?

Correct Answer: B. The person must be trustworthy, competent and of good business reputation.

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Question 3: Which of the following was originally chartered in the state in which it is doing business?

Correct Answer: A. Domestic companies.

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Question 4: Which of the following is NOT a procedure which must be followed by the State Insurance Director when suspending or revoking a producer license?

Correct Answer: C. If a hearing is requested, it can be held anywhere in the state of Illinois.

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Question 5: When can commissions be paid to a person who is NOT currently licensed?

Correct Answer: B. If the person was properly licensed at the time the policy was sold.

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Question 6: What is the title of the state official primarily in charge of regulating insurance companies, Insurance Producers and Business Entities?

Correct Answer: A. Director of Insurance.

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Question 7: Which of the following is NOT a quality needed to qualify as a professional?

Correct Answer: D. High income.

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Question 8: What is the fee for a Temporary Insurance Producer license?

Correct Answer: D. $ 50 one time.

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Question 9: What is the license fee for a Business Entity?

Correct Answer: A. $ 150 per two years.

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Question 10: Which of the following statements DOES NOT describe controlled business?

Correct Answer: C. A producer sells insurance on the life of a friend.

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Question 11: The State Minimum Standards rule applies to what type of policies?

Correct Answer: B. All individual Health insurance policies.

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Question 12: Which of the following statements concerning an Insurance Producer license is true?

Correct Answer: A. A person with an Insurance Producer license can sell for only one insurance company.

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Question 13: Which of the following is NOT an Insurance Producer license qualification?

Correct Answer: D. The producer must sell only controlled business.

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Question 14: All of the following statements concerning the sale of Medicare Supplement insurance are true EXCEPT?

Correct Answer: C. The Insurance Producer does not have a responsibility to determine the appropriateness of the policy in light of the applicant's other coverages.

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Question 15: When must a Premium Fund Trust Account be maintained?

Correct Answer: C. Whenever a producer is going to hold monies for 15 days.

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Question 16: In which situations must an Insurance Producer be disclosed in a policy?

Correct Answer: A. All policies.

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Question 17: Mr. R. Bear, an Insurance Producer, has been caught giving a rebate to a client, Ms. E. Caitlin. Which of the following penalties does NOT apply?

Correct Answer: C. Mr. R. Bear can be fined up to $5000 and/or be sentenced to 5 years in prison.

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Question 18: A Premium Fund Trust Account can be maintained in which of the following types of accounts?

Correct Answer: B. An Illinois bank account.

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Question 19: Which of the following is NOT an Unfair Method of Competition for which a person can be fined a maximum civil penalty of $5000?

Correct Answer: A. Misappropriating premium moneys.

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Question 20: Which of the following is a license requirement?

Correct Answer: D. Application from the individual applicant.

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Question 21: Who has a fiduciary responsibility to the insurance company in handling premium monies?

Correct Answer: D. A Business Entity who has submitted an insurance application to an insurance company which the insurance company accepted.

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Question 22: When is an insurance company considered to have a qualified training program?

Correct Answer: A. When at least 50% of its Temporary Insurance Producers obtain Insurance Producer licenses prior to the expiration of their Temporary Insurance Producer licenses.

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Question 23: Which of the following statements concerning an Insurance Producer license is true?

Correct Answer: C. It is issued to the individual's resident address.

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Question 24: Which is a penalty for acting as an Insurance Producer without a proper license?

Correct Answer: A. Class A Misdemeanor.

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Question 25: Which of the following is a penalty for an Unfair Method of Competition such as overstating the financial status of an insurance company?

Correct Answer: C. Fine of not less than $100, but not more than $5000.

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Question 26: Which of the following statements concerning the Department of Insurance Advertisement of Accident and Sickness Insurance regulation is NOT true?

Correct Answer: C. It can be stated the insured may profit from being disabled.

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Question 27: Ms. J. Jordan, an Insurance Producer, has been caught violating the controlled business requirement. Which of the statements is true?

Correct Answer: C. That means she did not sell as much insurance to others as what she sold to herself, her spouse, her own business or her employer.

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Question 28: Which of the following statements describes a Business Entity?

Correct Answer: B. It is an organization that sells and services insurance.

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Question 29: To whom may a Temporary Insurance Producer in Case of Death, Disability or Military Service license be issued?

Correct Answer: D. The widow of a deceased Insurance Producer who has never taken the state examinations.

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Question 30: Which of the following must be disclosed in an Accident/Health insurance advertisement?

Correct Answer: A. The name of the insurance company.

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Question 31: Which of the following is an objective of the Illinois Insurance Guaranty Fund?

Correct Answer: A. Prevent insureds from losing benefits when insurance companies become insolvent.

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Question 32: Mr. S. Jordan, an Insurance Producer, has been caught making an intentional, material misstatement on an application for his Insurance Producer license. Which of the following penalties does NOT apply?

Correct Answer: A. Up to one year in jail.

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Question 33: According to the state Insurance regulations, an insurance company can contest a health insurance claim only due to fraud after the policy has been in effect how long?

Correct Answer: B. 2 years.

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Question 34: Who would qualify for an Illinois Non-Resident producer license?

Correct Answer: C. An individual who resides in Kentucky and is licensed as an insurance producer in Kentucky who wants to sell insurance in Illinois.

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Question 35: Which of the following is not a record required by a Premium Fund Trust Account?

Correct Answer: D. Paid invoices for office expenses.

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Question 36: Which of the following can be considered to be pre-existing conditions under the State Department of Insurance rules?

Correct Answer: A. Something that occurred before the inception date of the policy and continued to manifest itself up to the inception of the policy.

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Question 37: To sell insurance, which of the following must have a license, but does NOT have to take a written examination?

Correct Answer: D. Limited Lines Producers.

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Question 38: Which of the following have to be licensed as an insurance producer?

Correct Answer: C. People who quote rates and negotiate coverages.

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Question 39: How often can the State Insurance Director financially examine an Insurance Producer?

Correct Answer: D. At random.

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Question 40: Which of the following acts does NOT require an Insurance Producer license?

Correct Answer: B. Being a Public Adjuster.

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Question 41: Which of the following must be disclosed in an Accident and Health insurance policy advertisement?

Correct Answer: A. Whether the insurance company can refuse to renew, cancel or terminate the policy.

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Question 42: Which of the following describes a Limited Lines Producer?

Correct Answer: D. An individual who can sell only certain limited types of insurance.

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Question 1: Which of the following acts requires an Insurance Producer license?

Correct Answer: A. Actively selling insurance.

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Question 2: Which of the following is a legal Accident/Health insurance advertising practice?

Correct Answer: C. Stating that the initial premium is reduced, but will increase later.

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Question 3: They are not required to take the Illinois examination if their resident state requires examination of Illinois producers.

Correct Answer: C. A company owned by stockholders.

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Question 4: Which of the following describes altruism?

Correct Answer: D. Unselfishness.

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Question 5: Who applies for a Business Entity license?

Correct Answer: B. An authorized member.

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Question 6: What is a penalty for NOT being properly licensed as an insurance producer?

Correct Answer: D. Class A misdemeanor for selling one policy without a proper license.

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Question 7: Which of the following is a Temporary Insurance Producer license requirement?

Correct Answer: C. The applicant must be in the process of fulfilling the Pre-License Education requirement.

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Question 8: An Insurance Producer has died. Which statement applies?

Correct Answer: A. A Temporary Insurance Producer in Case of Death, Disability or Military Service license may be obtained by a surviving spouse without examination.

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Question 9: When can an insurance company, Insurance Producer or Business Entity be financially examined by the State Department of Insurance?

Correct Answer: B. All insurance companies must submit annual financial statements to every State Department of Insurance where they are licensed.

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Question 10: A Premium Fund Trust Account may be maintained in any of the following types of accounts EXCEPT?

Correct Answer: D. A New York bank account.

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Question 11: Failure to maintain proper records on premium monies can result in all of the following penalties EXCEPT?

Correct Answer: D. Revocation of license for 5 years.

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Question 12: What insurance companies must participate in the Guaranty Fund?

Correct Answer: D. All admitted insurance companies.

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Question 13: An Insurance Producer has been convicted of a felony crime. Which of the following statements apply?

Correct Answer: A. The Insurance Producer must report the felony conviction to the State Insurance Director.

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Question 14: Which of the following is ALWAYS an Insurance Producer license requirement?

Correct Answer: A. $215 per two-year Illinois Insurance Department fee.

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Question 15: What is the penalty for rebating?

Correct Answer: B. Class B Misdemeanor.

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Question 16: State law allows an insurance company to contest a claim because of a misstatement on an Accident and Health insurance application after two years only for which of the following reasons?

Correct Answer: A. Fraud.

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Question 17: All of the following are penalties that can be applied to misappropriation of premium money EXCEPT?

Correct Answer: C. 20 years prison.

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Question 18: Which of the following does NOT describe controlled business?

Correct Answer: C. All of the insurance a person sells is to cold prospects the producer does not know.

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Question 19: All of the following are considered to be a form of advertisement by the Advertising of Accident and Sickness Insurance Regulation EXCEPT?

Correct Answer: C. Rebates.

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Question 20: Commissions can be paid to whom?

Correct Answer: A. A licensed Insurance Producer who solicits or binds an insurance policy.

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Question 21: Which of the following statements concerning the advertisement of Accident and Health insurance is NOT true?

Correct Answer: C. If the person who is making a testimonial is being paid or has a financial interest in the insurance company it does not have to be disclosed.

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Question 22: What is the license fee for a Business Entity?

Correct Answer: A. $150 per two years.

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Question 23: Which of the following statements concerning Medicare Supplement insurance is NOT true?

Correct Answer: A. Private Medicare Supplement insurance policies do not require state Department of Insurance approval.

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Question 24: Which of the following does NOT have a fiduciary responsibility to the insurance company in handling premium monies?

Correct Answer: A. Insured.

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Question 25: Which of the following situations could be considered by State Department of Insurance rules to be a pre-existing condition?

Correct Answer: D. Mr. Sean had fainting spells and excruciating pain about two weeks before he took out his policy, but he did not seek medical attention.

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Question 26: Which of following statements apply to Non-Resident Insurance Producers?

Correct Answer: B. Their policies do not have to be countersigned by a resident Producer.

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Question 27: Who can terminate an Insurance Producer license?

Correct Answer: D. The individual person.

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Question 28: Which of the following does NOT describe brokerage?

Correct Answer: C. Selling stocks, bonds and real estate in addition to insurance.

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Question 29: When must money be deposited to a Premium Fund Trust Account?

Correct Answer: B. When holding monies 15 days or more.

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Question 30: In which of the following circumstances would an insurance company be required to report the circumstances concerning the termination of a producer's agency contract?

Correct Answer: D. The producer was caught misappropriating premium monies from customers.

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Question 31: All of the following are requirements for an Insurance Producer license EXCEPT?

Correct Answer: A. At least age 21.

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Question 32: A Premium Fund Trust Account requires all of the following EXCEPT?

Correct Answer: C. Policyholder’s personal information.

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Question 33: Which of the following are NOT required to be licensed?

Correct Answer: A. Employers who administer their own employee benefit programs.

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Question 34: Which of the following is required to take an examination?

Correct Answer: C. Someone who was licensed in another state but terminated his/her license more than two years ago.

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Question 35: When is a Premium Finance Company license required?

Correct Answer: C. An Insurance Producer has allowed more than 10% of his/her accounts receivable to go over 90 days.

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Question 36: In which of the following cases may the Insurance Producer bond be waived?

Correct Answer: A. The individual intends to broker no insurance.

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Question 37: Which of the following is an example of a rebate?

Correct Answer: D. An Insurance Producer offers a prospect a $100 discount if the prospect will buy.

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Question 38: Which of the following statements concerning a stated value noncoordinating health insurance policy is true?

Correct Answer: D. It pays a stated (fixed) benefit independent of the insured’s actual hospital /medical bills.

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Question 39: Which of the following is a requirement that applies after an examination has been made?

Correct Answer: B. If an Insurance Producer receives a report from the State Insurance Director alleging substantive violations of State Insurance Laws, he or she has 14 days to demand a hearing.

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Question 40: Which of the following statements concerning suspension and revocation of license is true?

Correct Answer: D. When a license is revoked, the individual can apply for a license again after three years.

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Question 41: Which of the following is NOT a penalty for violating an order issued by the State Insurance Director as a result of an examination or hearing?

Correct Answer: C. Up to 1 year in jail.

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Question 42: Which of the following describes a Limited Lines Producer license?

Correct Answer: B. Applicant must be competent, trustworthy and of good business reputation.

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Question 43: What is the Insurance Producer Administrative fund?

Correct Answer: D. It is a fund that the State Department of Insurance maintains for license fees received.

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Question 1: All of the following are penalties that could apply for failure to properly maintain a Premium Fund Trust Account EXCEPT?

Correct Answer: A. Revocation of license.

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Question 2: Which of the following statements about revocation of a producer license is true?

Correct Answer: A. At the end of the revocation period the producer automatically gets his or her license back.

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Question 3: Which of the following is NOT a characteristic of altruism?

Correct Answer: A. Unselfishness.

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Question 4: The State Insurance Director has decided to examine an Insurance Producer. Which of the following is NOT a procedure that must be followed?

Correct Answer: A. All persons being examined as well as their officers, directors and employees must provide the State Insurance Director or his/her examiners convenient and free access at all reasonable hours to their offices, records and documents.

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Question 5: When collecting and accounting for premium moneys to whom does a producer owe a fiduciary responsibility?

Correct Answer: A. The insured.

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Question 6: Which of the following describes brokering?

Correct Answer: A. An Insurance Producer arranges coverage for a client through an insurance company with which the producer does not have an agency contract.

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Question 7: Which of the following statements concerning the advertisement of Accident and Sickness insurance policies is NOT true?

Correct Answer: A. Limited disease policies must conspicuously state the limited nature of the policy.

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Question 8: Which of the following is NOT an Insurance Producer education requirement?

Correct Answer: A. 25 hours of Pre-License Education.

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Question 9: Which of the following is a requirement of the Advertising of Accident and Sickness Insurance regulation?

Correct Answer: A. Statements that applicants will receive substantial advantages not available at a later date when, in fact, they will be available at later dates.

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Question 10: What is the license fee for a Limited Lines Producer license?

Correct Answer: A. $75 per year.

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Question 11: An Insurance Producer has entered the military. Which of the following statements apply?

Correct Answer: A. The Director of Insurance will not waive license renewal application, fee or continuing education requirements.

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Question 12: All of the following constitute misappropriation of premium money EXCEPT?

Correct Answer: A. Pay office salaries out of premiums collected.

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Question 13: Which of the following is a requirement for a Non-Resident Insurance Producer license?

Correct Answer: A. All applicants must pass an Illinois written examination.

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Question 14: Which of the following statements describes a Premium Fund Trust Account?

Correct Answer: A. Its purpose is to keep monies being held for insurance companies separate from personal or business monies.

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Question 15: To whom may commissions NOT be paid?

Correct Answer: A. An employee of a Business Entity who did not hold a license for the class of insurance at the time the policy was sold.

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Question 16: Mr. Ryan James is an insurance company underwriter who is NOT involved in solicitation or negotiation of policies. Which of the following applies?

Correct Answer: A. He is not required to be licensed.

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Question 17: Which of the following is an example of an illegal rebate?

Correct Answer: A. Taking a client out to lunch so that you will have an opportunity to make a sales presentation.

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Question 18: Which of the following statements concerning an Insurance Producer bond is true?

Correct Answer: A. Only applicants for an Insurance Producer license covering all lines of insurance must file a bond.

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Question 19: Mr. S. Jordan was completely cured from asthma 5 years prior to purchasing a health insurance policy. Which of the following measures can the insurance company NOT take?

Correct Answer: A. Classify the asthma as a pre-existing condition under a Pre-Existing condition clause.

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Question 20: Which of the following is an Insurance Producer examination requirement?

Correct Answer: A. An individual must pass the examination for at least one class of insurance to be licensed in all classes of insurance.

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Question 21: Which of the following must participate in the Illinois Insurance Guaranty Fund?

Correct Answer: A. All Illinois domestic companies.

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Question 22: Which of the following statements concerning termination of an Insurance Producer license is true?

Correct Answer: A. It can be revoked if the Continuing Education requirement is not satisfied

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Question 23: All of the following statements concerning licensing are true EXCEPT?

Correct Answer: A. A Temporary Insurance Producer license in Case of Death, Disability or Military Service is issued for a period of 180 days and may be renewed for an additional term.

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Question 24: Which of the following is a disbursement that may be made from a Premium Trust Account?

Correct Answer: A. Office rent.

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Question 25: The State Insurance Director has which of the following powers?

Correct Answer: A. Approve all premium rates.

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Question 26: Which of the following situations would require a Premium Finance Company license?

Correct Answer: A. An Insurance Producer charges premiums and bills on account collecting all monies within 90 days.

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Question 27: When must a change of address be reported?

Correct Answer: A. An Insurance Producer must report only a change of business address.

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Question 28: Mr. Strong Hitter, a famous Redbird player, has agreed to appear on television on behalf of Fast Pay Mutual Insurance Company. Which of the following applies?

Correct Answer: A. Any testimonial statements he makes must be genuine and represent his current opinion.

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Question 29: All of the following describe an Insurance Producer EXCEPT?

Correct Answer: A. An individual who sells insurance.

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Question 30: Which of the following is NOT a type of insurance that can be sold by a Limited Lines Producer?

Correct Answer: A. Whole Life insurance.

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Question 31: A policy CANNOT be called a Medicare Supplement policy unless which of the following requirements are met?

Correct Answer: A. It must be a Plan A.

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Question 1: An auto was damaged by a hit and run driver. Which coverage applies?

Correct Answer: C. Uninsured Motorist Property Damage.

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Question 2: Which of the following does NOT require an Insurance Producer license?

Correct Answer: D. Working as a receptionist in an insurance company home office.

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Question 3: An Insurance Producer surrendered her license in order to assume a public office. Which of the following would apply?

Correct Answer: C. She can later become re-licensed without re-examination.

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Question 4: Which of the following is NOT an Unfair Method of Competition which carries with it a fine of up to $5,000?

Correct Answer: C. Selling additional policies to established customers.

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Question 5: All of the following statements concerning the State Workers Compensation Act are true EXCEPT?

Correct Answer: A. There is no penalty for not carrying Workers Compensation Insurance or having a self-insurance plan.

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Question 6: An insurance company can pay renewal commissions to which of the following?

Correct Answer: C. An individual not currently licensed, but who was licensed at the time that the policy was sold.

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Question 7: An employee has been injured in a work related accident. The employer does NOT have Workers Compensation insurance. Which of the following penalties applies?

Correct Answer: A. The employer loses all Common Law defenses.

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Question 8: Which of the following statements concerning the Insurance Producer written examination is true?

Correct Answer: B. An application and fees must be submitted.

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Question 9: When is an Insurance Producer bond required?

Correct Answer: B. When an Insurance Producer intends to broker insurance.

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Question 10: Which of the following is a purpose of the Premium Fund Trust Account?

Correct Answer: D. Both to establish bookkeeping requirements and to keep moneys from being commingled.

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Question 11: Which of the following do NOT have to be licensed?

Correct Answer: D. Salaried Business Entity employees who are not paid a commission and who are engaged only in clerical duties.

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Question 12: The Insurance Director has held a hearing concerning an Insurance Producer's violation of the State Insurance Code. Which of the following does NOT apply?

Correct Answer: C. The Insurance Producer is not bound (obligated) by the State Insurance Director order.

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Question 13: Mr. R. James, an Insurance Producer, has entered the military. Which of the following statements concerning his Insurance Producer license applies?

Correct Answer: B. He may obtain waiver of license renewal while he is in the military if he does not intend to sell insurance while in the military.

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Question 14: Which of the following requires a Premium Finance Company license?

Correct Answer: C. Charging premiums on account for more than 90 days without charging interest.

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Question 15: Which of the following statements best describes a stock insurance company?

Correct Answer: A. Owned by its stockholders.

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Question 16: Which of the following qualifies for a Temporary Insurance Producer license?

Correct Answer: A. An individual whose appointing insurance company has made application, is enrolled in a qualified training program and who is in the process of fulfilling the Pre-License Education requirements.

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Question 17: What is the penalty for selling insurance without the proper license and misappropriating premiums?

Correct Answer: B. A class 4 Felony.

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Question 18: An Insurance Producer has been convicted of a felony crime. Which of the following statements is true?

Correct Answer: A. The felony conviction must be reported within 30 days of judgment being entered.

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Question 19: What is a penalty for NOT maintaining premium monies in a proper manner?

Correct Answer: D. A license can be revoked.

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Question 20: An individual may satisfy the State Financial Responsibility requirement how?

Correct Answer: A. By posting evidence of an insurance policy covering either the driver or the automobile in effect at the time of the accident.

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Question 21: All of the following are qualities needed to be professional EXCEPT which?

Correct Answer: A. Large numbers of clients.

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Question 22: An Insurance Producer CANNOT do which of the following?

Correct Answer: D. Sell the insured any product the producer wants to without regard to the insured's best interest.

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Question 23: Which of the following describes the Insurance Producer Administrative Fund?

Correct Answer: D. It is a fund in which all license fees are deposited by the State Department of Insurance.

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Question 24: Which of the following is NOT a penalty for misappropriating premium monies?

Correct Answer: A. A civil penalty of not more than $500.

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Question 25: Which of the following is a rebate?

Correct Answer: D. An Insurance Producer giving a client a $100 discount on a Homeowner policy.

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Question 26: The State Insurance Director can financially examine which of the following?

Correct Answer: A. All domestic insurance companies periodically.

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Question 27: How many days notice is required when canceling an insurance policy?

Correct Answer: D. 10 days notice for nonpayment of premiums.

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Question 28: Payments CANNOT be made out of a Premium Fund Trust Account for which of the following?

Correct Answer: C. Office salaries

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Question 29: Which of the following statements concerning Auto Insurance limits of liability is true?

Correct Answer: A. Minimum Liability coverage limits are $25,000/$50,000/$20,000.

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Question 30: Which of the following statements concerning a Limited Lines Producer is NOT true?

Correct Answer: C. The individual applicant must apply and pay the required fees.

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Question 31: What is a fiduciary duty?

Correct Answer: C. It is an obligation of special or extra care.

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Question 32: A Limited Lines Producer license can be terminated by whom?

Correct Answer: C. Either the insurance company, the state Insurance Director or the individual Limited Lines Producer.

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Question 33: Which of the following statements concerning license suspension and revocation is true?

Correct Answer: D. A license can be revoked due to misappropriation of premiums.

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Question 34: To whom is an Insurance Producer responsible while holding premium monies?

Correct Answer: A. The insurance company.

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Question 35: What is the State of Illinois fee for a Business Entity?

Correct Answer: B. $150 per two years.

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Question 36: A change of address must be reported when?

Correct Answer: C. 30 days.

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Question 37: An insurance company has terminated a Limited Lines Producer because he was caught accepting insurance business from someone who was NOT licensed. The insurance company failed to report the circumstances to the State Insurance Director. Which of the following penalties applies?

Correct Answer: D. The insurance company is subject to a civil penalty or suspension or revocation of its license.

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Question 38: Insurance Producers S. Jordan and R. James have jointly sold an insurance policy to Ms. E. Caitlin. Which of the following statements apply?

Correct Answer: A. Both of their names must be disclosed on the policy.

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Question 39: Which of the following is NOT contained on an Insurance Producer license?

Correct Answer: A. Name of insurance company.

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Question 40: Which of the following statements concerning a Temporary Insurance Producer in Case of Death, Disability or Military Service license is true?

Correct Answer: A. It allows the sale of insurance only as the Insurance Director allows.

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Question 41: An auto policy can be cancelled or nonrenewed for what reason?

Correct Answer: A. Cancelled due to misrepresentation in the application.

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Question 42: What is an Illinois Pre-License Education requirement?

Correct Answer: A. 20 hours of instruction for each class of insurance.

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Question 43: The State Workers Compensation Commission does all of the following EXCEPT?

Correct Answer: A. Supervises the Workers Compensation Assigned Risk Pool.

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Question 1: Which of the following is true concerning a Business Entity?

Correct Answer: A. It is the same as an insurance agency.

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Question 2: A Worker's Compensation insurance policy will NOT cover which of the following?

Correct Answer: A. Medical expenses, lost wages, and permanent disability benefits for which an employer becomes responsible as a result of a work accident.

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Question 3: What is it called when an individual applying for a non-resident insurance license is NOT required to take an examination because his or her resident state does NOT require an examination of individuals from other states wishing to become Non-Resident Producers?

Correct Answer: A. Reciprocity.

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Question 4: Which of the following does NOT require an Insurance Producer license?

Correct Answer: A. Receive commissions.

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Question 5: Which of the following penalties for Unfair Methods of Competition apply?

Correct Answer: A. A civil penalty of not more than $500 for misstating the financial status of an insurance company.

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Question 6: What is the fee for an Insurance Producer license?

Correct Answer: A. $215 per two years paid by the producer.

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Question 7: Who does Uninsured Motorists and Underinsured Motorists coverages protect?

Correct Answer: A. The insured only.

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Question 8: A Premium Fund Trust Account can be maintained in which of the following types of accounts?

Correct Answer: A. Checking account in an Illinois bank.

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Question 9: Which types of insurance can a Limited Lines Producer NOT sell?

Correct Answer: A. Homeowners insurance.

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Question 10: An Insurance Producer agency contract was terminated by an insurance company because the producer was caught misappropriating premiums. Which of the following applies?

Correct Answer: A. The insurance company has no obligation to report this to the State Department of Insurance.

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Question 11: An Insurance Producer has been caught misappropriating premium monies. The State Insurance Director has issued an order revoking her license. Which of the following procedures must be followed?

Correct Answer: A. The Insurance Director must send that person a written notice of revocation at least 60 days prior to its effective date.

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Question 12: Which of the following is NOT a qualification to obtain coverage through the Automobile Insurance Plan?

Correct Answer: A. Have been rejected for auto insurance.

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Question 13: Which of the following is NOT a penalty for violating an order issued by the State Insurance Director?

Correct Answer: A. License suspension.

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Question 14: What is the State of Illinois fee for a Limited Lines Producer license?

Correct Answer: A. $50 per year paid by the insurance company.

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Question 15: Which must an insurance company do when canceling or nonrenewing an auto policy?

Correct Answer: A. Always calculate the return premium on a short rate basis.

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Question 16: Which of the following is NOT a qualification for an Insurance Producer's license?

Correct Answer: A. Payment of fees.

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Question 17: Mr. R. James, an Insurance Producer, has an agreement with Crash Mutual Automobile Insurance Company. The agreement authorizes Mr. James to sell and service policies issued by Crash Mutual. What would you call that agreement?

Correct Answer: A. An agency agreement.

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Question 18: Which of the following statements concerning the Workers Compensation Assigned Risk Pool is true?

Correct Answer: A. It is supervised by the State Attorney General.

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Question 19: Which of the following is NOT a prohibited activity for which a license can be suspended?

Correct Answer: A. Willfully violating any State Insurance Law.

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Question 20: Which of the following statements concerning premium monies is NOT true?

Correct Answer: A. When an insurance company accepts an application submitted by an Insurance Producer and issues a policy, the insurance company automatically authorizes the Insurance Producer to collect the premiums for it.

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Question 21: Which of the following must be licensed?

Correct Answer: A. The next of kin of a deceased Insurance Producer who wishes to maintain the deceased producer's business.

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Question 22: Which of the following are NOT required to carry Workers Compensation insurance?

Correct Answer: A. Employers of clerical employees.

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Question 23: What percentage of Temporary Insurance Producers must pass their exams and obtain Insurance Producer licenses in order for an insurance company to have a qualified training program?

Correct Answer: A. 25% each six-month period.

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Question 24: Which of the following is NOT an example of controlled business?

Correct Answer: A. Selling insurance primarily to oneself.

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Question 25: When must an insurance company allow a rate reduction on an auto policy?

Correct Answer: A. An auto equipped with a CB radio.

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Question 26: There is a State Insurance Law which sets forth the amount of time in which various types of claims must be paid. What is it called?

Correct Answer: A. State Financial Responsibility Law.

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Question 1: Which of the following statements concerning cancellation and/or nonrenewal of an Auto Insurance policy is true?

Correct Answer: D. The insurance company must notify the insured of his or her right to appeal the cancellation or nonrenewal to the State Insurance Director.

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Question 2: Which of the following is NOT a penalty for improperly maintaining a Premium Fund Trust Account?

Correct Answer: D. Class B Misdemeanor.

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Question 3: What is the penalty for acting as an Insurance Producer without a license?

Correct Answer: D. Class A Misdemeanor for acting as an Insurance Producer without proper licensing.

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Question 4: An Insurance Producer has all of the following duties to an insured EXCEPT which?

Correct Answer: D. Make sure the insured is always getting the lowest premium rate possible.

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Question 5: Ms. J. Jordan, an Insurance Producer, was elected to a public office. Election to that office required her to surrender her Insurance Producer license in order to avoid any possibility of a conflict in interest. Which of the following statements apply?

Correct Answer: A. Ms. Jordan will not have to retake the examination to get her license within four years.

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Question 6: Which of the following statements concerning financial examinations is true?

Correct Answer: B. All insurance companies must submit detailed financial statements to all State Department of Insurances where they are licensed every year.

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Question 7: What is controlled business?

Correct Answer: C. Selling insurance only to yourself, your spouse, the business you are employed by, or your own business.

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Question 8: Which of the following describes a stock insurance company?

Correct Answer: A. Owned by stockholders.

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Question 9: Which of the following is NOT a penalty for misappropriating premium monies?

Correct Answer: C. Continuing Education.

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Question 10: Which of the following would be an example of rebating?

Correct Answer: A. Paying someone a referral fee only if the referral buys.

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Question 11: What is the license fee for a Limited Insurance Representative license?

Correct Answer: B. $50 per year paid by the insurance company.

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Question 12: Which of the following statements concerning the State Workers Compensation Commission is true?

Correct Answer: C. All insurance and self-insurance plans must be filed with it.

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Question 13: Which of the following describes Underinsured Motorists coverage?

Correct Answer: C. It covers the difference between the at-fault driver's liability limits and the insured's Underinsured Motorist limits.

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Question 14: Which of the following do NOT have to be disclosed in an insurance policy?

Correct Answer: D. Underwriters.

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Question 15: If an insurance company becomes insolvent, which of the following would apply?

Correct Answer: A. An assessment may be made against the members of the Illinois Insurance Guaranty Fund to pay claims.

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Question 16: When can commissions be paid?

Correct Answer: D. To someone who was properly licensed for the line of insurance sold at the time the sale was made.

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Question 17: Which of the following is a special state fund in which all license and examination fees are deposited by the State Insurance Director?

Correct Answer: B. Insurance Producer Administrative Fund.

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Question 18: Which of the following statements concerning a change of address is true?

Correct Answer: C. All changes of address must be reported within 30 days.

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Question 19: Which of the following applies when an Insurance Producer enters the military?

Correct Answer: B. If the individual is not going to sell any insurance while in the military, he or she may file for a waiver from license fees while in the military.

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Question 20: How may an individual obtain coverage through the Automobile Insurance Plan?

Correct Answer: D. Apply directly him or herself.

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Question 21: When an Insurance Producer accepts premium money, the producer has an obligation of special or extra responsibility. What is that called?

Correct Answer: A. A fiduciary responsibility.

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Question 22: In which of the following situations is a license required, but NO examination (which of the following is an exemption from examination)?

Correct Answer: B. Applicants for Non-Resident Insurance Producer licenses.

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Question 23: Which of the following is an Unfair Method of Competition carrying with it a fine of not more than $5,000?

Correct Answer: C. Misrepresenting the financial status of an insurance company.

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Question 24: A Workers Compensation policy will NOT cover which of the following?

Correct Answer: D. Common Law liability to someone other than an employee.

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Question 25: All of the following are qualities needed to be professional EXCEPT which?

Correct Answer: A. Large number of clients.

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Question 26: Which of the following requires a Premium Finance Company license?

Correct Answer: D. Allowing a client more than 90 days to pay his premiums without charging him interest or any late charges.

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Question 27: Which of the following statements concerning Business Entities is true?

Correct Answer: C. A Business Entity is a person or organization who employees individuals to act as Insurance Producers.

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Question 28: Which of the following parties do NOT have a special responsibility in handling premium monies?

Correct Answer: B. The insured.

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Question 29: Which of the following statements describes an Insurance Producer?

Correct Answer: D. An individual who sells, solicits or negotiates coverage on property located in Illinois.

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Question 30: Which of the following is a qualification for a Limited Lines Producer license?

Correct Answer: B. Trustworthy, competent and of good business reputation.

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Question 31: Which of the following statements concerning cancellation and/or nonrenewal of an auto policy is state law?

Correct Answer: A. After an auto policy has either been in effect 60 days or renewed, the policy can be cancelled only for certain reasons specified in the State Insurance Laws.

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Question 32: Which of the following statements concerning Uninsured Motorists coverage is true?

Correct Answer: B. It must be written with minimum limits of $25,000/$50,000.

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Question 33: When must an insurance company provide the State Insurance Director with information pertaining to the termination of a producer?

Correct Answer: C. When the producer is being terminated because he or she violated an insurance law.

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Question 34: Which of the following is a Continuing Education requirement?

Correct Answer: C. Completing a course that has been approved by the State Department of Insurance.

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Question 35: When can a Temporary Insurance Producer license be issued?

Correct Answer: C. Before an examination has been taken as long as the individual is enrolled in a qualified training program provided by the appointing insurance company and is engaged in a Pre-License Education program.

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Question 36: Which of the following must be reported to the State Insurance Director?

Correct Answer: A. A felony conviction.

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Question 37: Which of the following can be done by an individual possessing a Temporary Insurance Producer in Case of Death, Disability or Military Service License?

Correct Answer: A. Anything a producer can normally do, unless the Insurance Director imposes limitations.

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Question 38: When is an Insurance Producer license bond required?

Correct Answer: B. When the producer sometimes acts as a broker.

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Question 39: The primary purpose of a Premium Fund Trust Account is what?

Correct Answer: C. To keep premium monies held for insurance companies separate from other monies.

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Question 40: All of the following must carry Workers Compensation Insurance or have a self-insurance plan filed EXCEPT?

Correct Answer: A. Employers of certain types of farm and domestic employees.

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Question 41: Which of the following is NOT a penalty for a serious, willful violation of a State Insurance Law?

Correct Answer: A. A civil penalty not to exceed $1,000 no matter how many offenses have been committed.

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Question 42: An insurance company has terminated a producer because she did something illegal. The insurance company has failed to report this to the State Department of Insurance. Which of the following penalties would apply?

Correct Answer: A. A civil penalty.

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Question 43: Which of the following types of disbursements CANNOT be made from a Premium Fund Trust Account?

Correct Answer: C. Direct payment of advertising expenses.

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Question 44: An individual has been examined by the State Department of Insurance. He/she has received a report alleging substantive violations. He/she must request a hearing within how many days?

Correct Answer: B. 14 days.

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Question 1: Which of the following is NOT a penalty for misappropriating premium monies?

Correct Answer: A. A civil penalty of not more than $500.

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Question 2: When is an Insurance Producer bond required?

Correct Answer: B. When an Insurance Producer intends to broker insurance.

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Question 3: Which of the following must be licensed?

Correct Answer: A. The next of kin of a deceased Insurance Producer who wishes to maintain the deceased producer's business.

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Question 4: Which of the following statements concerning the Illinois Insurance Guaranty Fund is true?

Correct Answer: C. All property/casualty insurance companies admitted to sell insurance in Illinois must participate.

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Question 5: If an insurance company becomes insolvent, which of the following would apply?

Correct Answer: A. An assessment may be made against the members of the Illinois Insurance Guaranty Fund to pay claims.

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Question 6: What is the penalty for selling insurance without the proper license and misappropriating premiums?

Correct Answer: B. A class 4 Felony.

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Question 7: An auto policy can be cancelled or nonrenewed for what reason?

Correct Answer: A. Cancelled due to misrepresentation in the application.

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Question 8: Which of the following is NOT an example of controlled business?

Correct Answer: C. Selling only to clients to which the producer has no personal relationship.

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Question 9: Which of the following requires a Premium Finance Company license?

Correct Answer: C. Charging premiums on account for more than 90 days without charging interest.

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Question 10: In which of the following situations is a license required, but NO examination (which of the following is an exemption from examination)?

Correct Answer: B. Applicants for Non-Resident Insurance Producer licenses.

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Question 11: Which of the following statements concerning cancellation and/or nonrenewal of an auto policy is state law?

Correct Answer: A. After an auto policy has either been in effect 60 days or renewed, the policy can be cancelled only for certain reasons specified in the State Insurance Laws.

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Question 12: All of the following must carry Workers Compensation Insurance or have a self-insurance plan filed EXCEPT?

Correct Answer: A. Employers of certain types of farm and domestic employees.

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Question 13: An insurance company has terminated a producer because she did something illegal. The insurance company has failed to report this to the State Department of Insurance. Which of the following penalties would apply?

Correct Answer: A. A civil penalty.

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Question 14: When can commissions be paid?

Correct Answer: D. To someone who was properly licensed for the line of insurance sold at the time the sale was made.

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Question 15: Ms. E. Caitlin needs an insurance policy that her regular producer, Mr. R. James, does NOT regularly sell through his regular insurance company. He offers to obtain a policy for Ms. Caitlin by going through another Insurance Producer, Mr. S. Jordan, who represents a company that does offer the type of policy that Ms. Caitlin needs. What is this type of transaction called?

Correct Answer: B. Brokering.

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Question 16: Which of the following is NOT a prohibited activity for which a license can be suspended?

Correct Answer: C. Brokering insurance.

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Question 17: An Insurance Producer agency contract was terminated by an insurance company because the producer was caught misappropriating premiums. Which of the following applies?

Correct Answer: D. The insurance company is subject to a civil penalty of up to $1,000 if it fails to report it to the State Department of Insurance.

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Question 18: Which of the following is NOT an Unfair Method of Competition which carries with it a civil penalty of up to $5,000?

Correct Answer: C. Make a statement which fairly and accurately compares one insurance company’s policy to another insurance company’s policy.

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Question 19: Which of the following is a Continuing Education requirement?

Correct Answer: C. Completing a course that has been approved by the State Department of Insurance.

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Question 20: Which of the following statements concerning the Workers Compensation Assigned Risk Pool is true?

Correct Answer: C. All insurance companies selling Workers Compensation Insurance in Illinois must participate in its losses.

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Question 21: What is the State of Illinois fee for a Business Entity?

Correct Answer: B. $150 per two years.

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Question 22: Once a Business Entity is required to maintain a Premium Fund Trust Account, it is also required to maintain which of the following bookkeeping records?

Correct Answer: D. Accounts payable.

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Question 23: What is the penalty for NOT being properly licensed?

Correct Answer: C. A Class A Misdemeanor for acting as an Insurance Producer without the proper license.

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Question 24: Which of the following are NOT required to carry Workers Compensation insurance?

Correct Answer: D. Employers of certain types of farm or domestic employees.

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Question 25: Which of the following statements concerning premium monies is NOT true?

Correct Answer: C. If an insurance producer deposits premium moneys to a local bank account, but turns it into the insurance company within five days, a Premium Fund Trust Account is not required.

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Question 26: An Insurance Producer surrendered her license in order to assume a public office. Which of the following would apply?

Correct Answer: C. She can later become re-licensed without re-examination.

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Question 27: Which of the following parties do NOT have a special responsibility in handling premium monies?

Correct Answer: B. The insured.

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Question 28: Which of the following is NOT a penalty for improperly maintaining a Premium Fund Trust Account?

Correct Answer: D. Class B Misdemeanor.

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Question 29: Which of the following statements concerning Auto Insurance limits of liability is true?

Correct Answer: A. Minimum Liability coverage limits are $25,000/$50,000/$20,000.

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Question 30: Which of the following statements best describes an alien insurance company?

Correct Answer: D. Chartered in another country other than the one in which it is doing business.

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Question 31: Which of the following statements concerning a Limited Lines Producer is NOT true?

Correct Answer: C. The individual applicant must apply and pay the license fee.

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Question 32: An Insurance Producer has been convicted of a felony crime. Which of the following statements is true?

Correct Answer: A. The felony conviction must be reported within 30 days of judgment being entered.

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Question 33: Which of the following is true concerning a Business Entity?

Correct Answer: A. It is the same as an insurance agency.

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Question 34: Which of the following do NOT have to be disclosed in an insurance policy?

Correct Answer: D. Underwriters.

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Question 35: When must an insurance company allow a rate reduction on an auto policy?

Correct Answer: D. An auto equipped with anti-theft mechanisms.

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Question 36: All of the following statements concerning the State Workers Compensation Act are true EXCEPT?

Correct Answer: A. There is no penalty for not carrying Workers Compensation Insurance or having a self-insurance plan.

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Question 37: When can a Temporary Insurance Producer license be issued?

Correct Answer: C. Before an examination has been taken as long as the individual is enrolled in a qualified training program provided by the appointing insurance company and is engaged in a Pre-License Education program.

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Question 38: Which of the following is a purpose of the Premium Fund Trust Account?

Correct Answer: D. Both to establish bookkeeping requirements and to keep moneys from being commingled.

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Question 39: Which of the following statements concerning a change of address is true?

Correct Answer: C. All changes of address must be reported within 30 days.

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Question 40: The State Insurance Director has conducted an examination. Which of the following is NOT a procedure which may be followed?

Correct Answer: B. If a report is issued, it will not be sent to the person or entity examined.

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Question 41: Mr. R. James, an Insurance Producer, has entered the military. Which of the following statements concerning his insurance Producer license applies?

Correct Answer: B. He may obtain waiver of license renewal while he is in the military if he does not intend to sell insurance while in the military.

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Question 42: Which of the following is NOT a penalty for a serious, willful violation of a State Insurance Law?

Correct Answer: A. A civil penalty not to exceed $1,000 no matter how many offenses have been committed.

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Question 43: An individual has been examined by the State Department of Insurance. He/she has received a report alleging substantive violations. He/she must request a hearing within how many days?

Correct Answer: B. 14 days.

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Question 44: An Insurance Producer CANNOT do which of the following?

Correct Answer: D. Sell the insured any product the producer wants to without regard to the insured's best interest.

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Question 1: To whom does a producer owe a fiduciary responsibility?

Correct Answer: B. The insurance company.

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Question 2: All of the following describe controlled business EXCEPT?

Correct Answer: C. All of the insurance a person sells is to customers other than family, employees or a personally owned business.

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Question 3: When must a change of address be reported?

Correct Answer: B. A change of address must be reported within 30 days.

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Question 4: What is a "Buyer's Guide"?

Correct Answer: B. State Department of Insurance rules state verbatim what this booklet must state, telling consumers how to compare policies and previous rates.

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Question 5: Which of the following is NOT an Insurance Producer education requirement?

Correct Answer: A. 25 hours of Pre-License Education.

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Question 6: Which of the following is NOT an Insurance Producer license qualification?

Correct Answer: D. The producer must sell only controlled business.

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Question 7: Which is the penalty for an insurance company NOT giving the State Insurance Director proper notice of termination of a license when required?

Correct Answer: B. Civil penalty to the insurance company of up to $1000 per violation.

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Question 8: Who would qualify for an Illinois Non-Resident producer license?

Correct Answer: C. An individual who resides in Kentucky and is licensed as an insurance producer in Kentucky who wants to sell insurance in Illinois.

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Question 9: What is the fee for a Temporary Insurance Producer license?

Correct Answer: D. $ 50 one time.

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Question 10: Which of the following does NOT describe brokerage?

Correct Answer: C. Selling stocks, bonds and real estate in addition to insurance.

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Question 11: How long must insurance companies maintain files of life insurance advertising materials?

Correct Answer: D. 4 years.

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Question 12: When can an insurance company, Insurance Producer or Business Entity be financially examined by the State Department of Insurance?

Correct Answer: B. All insurance companies must submit annual financial statements to every State Department of Insurance where they are licensed.

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Question 13: What is the Insurance Producer Administrative fund?

Correct Answer: D. It is a fund that the State Department of Insurance maintains for license fees received.

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Question 14: Which of the following is considered to be a replacement of life insurance?

Correct Answer: B. A policy is being surrendered and the Paid-Up Insurance Nonforfeiture Option is being exercised at the same time that a new policy is being purchased.

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Question 15: An Insurance Producer has been convicted of a felony crime. Which of the following statements apply?

Correct Answer: A. The Insurance Producer must report the felony conviction to the State Insurance Director.

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Question 16: In which of the following circumstances would an insurance company be required to report the circumstances concerning the termination of a producer's agency contract?

Correct Answer: D. The producer was caught misappropriating premium monies from customers.

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Question 17: Which of the following describes a stock insurance company?

Correct Answer: C. A company owned by stockholders.

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Question 18: What is a life insurance policy surrender?

Correct Answer: D. It is when you turn in a policy and get cash back.

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Question 19: All of the following are penalties that could apply for failure to properly maintain a Premium Fund Trust Account EXCEPT which?

Correct Answer: D. Class X Felony.

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Question 20: Which of the following constitutes misappropriation of premium money?

Correct Answer: D. Failing to keep proper records on premium monies.

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Question 21: Which of the following is NOT a procedure which must be followed by the state Insurance Director when suspending or revoking a producer license?

Correct Answer: C. If a hearing is requested, the Insurance Director must give the insurance producer at least 45 days written notice of the hearing.

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Question 22: Mr. Ryan James is an insurance company underwriter who is NOT involved in solicitation or negotiation of policies. Which of the following applies?

Correct Answer: A. He is not required to be licensed.

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Question 23: What is the title of the state official primarily in charge of regulating insurance companies, Insurance Producers and Registered Firms?

Correct Answer: A. Director of Insurance.

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Question 24: Which of the following describe a Temporary Insurance Producer license?

Correct Answer: C. It allows an individual new to insurance sales to go out, start making sales and start earning commissions prior to having passed the written examination.

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Question 25: Which of the following statements concerning an Insurance Producer license is true?

Correct Answer: C. It is issued to the individual's resident address.

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Question 26: Which of the following must participate in the Illinois Insurance Guaranty Fund?

Correct Answer: D. All Illinois admitted companies.

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Question 27: When selling a new life insurance policy, which of the following must be done?

Correct Answer: C. Any statistics used must be presented fairly.

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Question 28: Which of the following describes altruism?

Correct Answer: D. Unselfishness.

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Question 29: Who applies for a Business Entity license?

Correct Answer: B. An authorized member.

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Question 30: Which of the following describes brokering?

Correct Answer: A. An Insurance Producer arranges coverage for a client through an insurance company with which the producer does not have an agency contract.

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Question 31: Which of the following acts does NOT require an Insurance Producer license?

Correct Answer: B. Being a Public Adjuster.

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Question 32: Which of the following is a Limited Lines Producer license requirement?

Correct Answer: B. The person must be trustworthy, competent and of good business reputation.

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Question 33: To whom may a Temporary Insurance Producer in Case of Death, Disability or Military Service license be issued?

Correct Answer: D. The widow of a deceased Insurance Producer who has never taken the state examinations.

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Question 34: To whom may commissions NOT be paid?

Correct Answer: A. An employee of a Business Entity who did not hold a license for the class of insurance at the time the policy was sold.

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Question 35: Which of the following is NOT considered to be a replacement of life insurance?

Correct Answer: C. The insured is converting a Term plan to a Whole Life plan.

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Question 36: All of the following are considered to be forms of advertisements EXCEPT which?

Correct Answer: D. Approximate figures which a producer orally quotes to the insured.

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Question 37: A Premium Fund Trust Account can be maintained in which of the following types of accounts?

Correct Answer: B. An Illinois bank account.

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Question 38: A Premium Fund Trust Account DOES NOT require which of the following records?

Correct Answer: C. Petty cash disbursements.

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Question 39: Mr. R. Bear, an Insurance Producer, has been caught giving a rebate to a client, Ms. E. Caitlin. All of the following penalties apply EXCEPT?

Correct Answer: C. Penalties can be assessed only to the insurance producer, not to the customer.

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Question 40: Which of the following are NOT required to be licensed?

Correct Answer: A. Employers who administer their own employee benefit programs.

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Question 41: The State Insurance Director has decided to examine an Insurance Producer. All of the following are procedures that must be followed EXCEPT?

Correct Answer: C. If the state Department of Insurance examiner writes a report to the Director a copy does not have to be sent to the person examined.

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Question 42: Which of the following does NOT have a fiduciary responsibility to the insurance company in handling premium monies?

Correct Answer: A. Insured.

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Question 43: Which of the following is NOT a quality needed to qualify as a professional?

Correct Answer: D. High income.

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Question 1: What is the fee for a Temporary Insurance Producer license?

Correct Answer: D. $ 50 one time.

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Question 2: What is the license fee for a Business Entity?

Correct Answer: A. $ 150 per two years.

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Question 3: Which of the following statements concerning life insurance advertisements and sales presentations is true?

Correct Answer: C. If testimonials are used, they must be genuine, represent the current opinion of the author and be applicable to the policy being advertised.

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Question 4: Which of the following is not a record required by a Premium Fund Trust Account?

Correct Answer: D. Paid invoices for office expenses.

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Question 5: Which of the following is a license requirement?

Correct Answer: D. Application from the individual applicant.

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Question 6: Which of the following is NOT considered to be a replacement of life insurance?

Correct Answer: C. The prospect is terminating a nonrenewable, nonconvertible term plan with 2 years left to expiration while buying a new policy.

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Question 7: Which of the following is NOT a quality needed to qualify as a professional?

Correct Answer: D. High income.

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Question 8: Which of the following acts does NOT require an Insurance Producer license?

Correct Answer: B. Being a Public Adjuster.

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Question 9: A Premium Fund Trust Account can be maintained in which of the following types of accounts?

Correct Answer: B. An Illinois bank account.

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Question 10: What is the title of the state official primarily in charge of regulating insurance companies, Insurance Producers and Business Entities?

Correct Answer: A. Director of Insurance.

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Question 11: An insurance company terminated a producer's agency contract because the producer was caught misappropriating premium monies. The insurance company failed to report this to the State Insurance Director. What penalties may apply?

Correct Answer: B. A civil penalty to the insurance company.

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Question 12: Which of the following have to be licensed as an insurance producer?

Correct Answer: C. People who quote rates and negotiate coverages.

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Question 13: Who would qualify for an Illinois Non-Resident producer license?

Correct Answer: C. An individual who resides in Kentucky and is licensed as an insurance producer in Kentucky who wants to sell insurance in Illinois.

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Question 14: Which of the following is an objective of the Illinois Insurance Guaranty Fund?

Correct Answer: A. Prevent insureds from losing benefits when insurance companies become insolvent.

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Question 15: When selling a new life insurance policy, which of the following must be done?

Correct Answer: C. Any statistics used must be presented fairly.

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Question 16: In which situations must an Insurance Producer be disclosed in a policy?

Correct Answer: A. All policies.

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Question 17: What is a mutual fund program?

Correct Answer: D. A program where a large number of investors contribute money to a fund which is used to make large-scale investments at high yields.

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Question 18: To whom may a Temporary Insurance Producer in Case of Death, Disability or Military Service license be issued?

Correct Answer: D. The widow of a deceased Insurance Producer who has never taken the state examinations.

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Question 19: What is a conversion of a life insurance policy?

Correct Answer: B. It is when you exercise a conversion provision within a policy to convert to a policy of a different type within the same insurance company.

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Question 20: Which of the following statements describes a Business Entity?

Correct Answer: B. It is an organization that sells and services insurance.

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Question 21: Which of the following was originally chartered in the state in which it is doing business?

Correct Answer: A. Domestic companies.

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Question 22: When is an insurance company considered to have a qualified training program?

Correct Answer: A. When at least 50% of its Temporary Insurance Producers obtain Insurance Producer licenses prior to the expiration of their Temporary Insurance Producer licenses.

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Question 23: Who has a fiduciary responsibility to the insurance company in handling premium monies?

Correct Answer: D. A Business Entity who has submitted an insurance application to an insurance company which the insurance company accepted.

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Question 24: To sell insurance, which of the following must have a license, but does NOT have to take a written examination?

Correct Answer: D. Limited Lines Producers.

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Question 25: According to the Advertising and Sales Promotion of Life Insurance regulation, which of the following is NOT a form of advertisement?

Correct Answer: C. General oral statements made by a producer concerning the value of a policy.

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Question 26: Which is a penalty for acting as an Insurance Producer without a proper license?

Correct Answer: A. Class A Misdemeanor.

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Question 27: Mr. Rangey O'Ryan has a $25,000 Whole Life Insurance policy which he bought last year which has NOT yet accrued any cash value. Mr. O'Ryan is considering surrendering that old policy in order to purchase a $100,000 Term policy. Which is NOT a requirement of the Insurance Producer selling the new policy?

Correct Answer: C. Avoid selling the new policy in as much as it would be a replacement policy.

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Question 28: Which of the following is a penalty for an Unfair Method of Competition such as overstating the financial status of an insurance company?

Correct Answer: C. Fine of not less than $100, but not more than $5000.

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Question 29: Which of the following is NOT an Unfair Method of Competition for which a person can be fined a maximum civil penalty of $5000?

Correct Answer: A. Misappropriating premium moneys.

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Question 30: Mr. S. Jordan, an Insurance Producer, has been caught making an intentional, material misstatement on an application for his Insurance Producer license. Which of the following penalties does NOT apply?

Correct Answer: A. Up to one year in jail.

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Question 31: When can commissions be paid to a person who is NOT currently licensed?

Correct Answer: B. If the person was properly licensed at the time the policy was sold.

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Question 32: Ms. J. Jordan, an Insurance Producer, has been caught violating the controlled business requirement. Which of the statements is true?

Correct Answer: C. That means she did not sell as much insurance to others as what she sold to herself, her spouse, her own business or her employer.

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Question 33: Which of the following statements DOES NOT describe controlled business?

Correct Answer: C. A producer sells insurance on the life of a friend.

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Question 34: Which of the following is NOT a procedure which must be followed by the State Insurance Director when suspending or revoking a producer license?

Correct Answer: C. If a hearing is requested, it can be held anywhere in the state of Illinois.

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Question 35: Mr. R. Bear, an Insurance Producer, has been caught giving a rebate to a client, Ms. E. Caitlin. Which of the following penalties does NOT apply?

Correct Answer: C. Mr. R. Bear can be fined up to $5000 and/or be sentenced to 5 years in prison.

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Question 36: Which of the following is a Limited Lines Producer license requirement?

Correct Answer: B. The person must be trustworthy, competent and of good business reputation.

---

Question 37: Which of the following statements concerning an Insurance Producer license is true?

Correct Answer: A. It is issued to an insurance company.

---

Question 38: When must a Premium Fund Trust Account be maintained?

Correct Answer: C. Whenever a producer is going to hold monies for 15 days.

---

Question 39: Which of the following describes a Limited Lines Producer?

Correct Answer: D. An individual who can sell only certain limited types of insurance.

---

Question 40: What is a "Buyer's Guide"?

Correct Answer: B. State Department of Insurance rules state verbatim what this booklet must state, telling consumers how to compare policies and premium rates.

---

Question 41: Which of the following is NOT an Insurance Producer license qualification?

Correct Answer: D. The producer must sell only controlled business.

---

Question 42: Which of the following statements concerning an Insurance Producer license is true?

Correct Answer: C. It is issued to the individual's resident address.

---

Question 43: How often can the State Insurance Director financially examine an Insurance Producer?

Correct Answer: D. At random.

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Question 1: Which of the following acts requires an Insurance Producer license?

Correct Answer: A. Actively selling insurance.

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Question 2: Which of the following is an example of a rebate?

Correct Answer: D. An Insurance Producer offers a prospect a $100 discount if the prospect will buy.

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Question 3: In which of the following cases may the Insurance Producer bond be waived?

Correct Answer: A. The individual intends to broker no insurance.

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Question 4: Which of the following statements concerning suspension and revocation of license is true?

Correct Answer: D. When a license is revoked, the individual can apply for a license again after three years.

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Question 5: Who can terminate an Insurance Producer license?

Correct Answer: D. The individual person.

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Question 6: Who applies for a Business Entity license?

Correct Answer: B. An authorized member.

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Question 7: Failure to maintain proper records on premium monies can result in all of the following penalties EXCEPT?

Correct Answer: D. Revocation of license for 5 years.

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Question 8: Which of the following describes a Limited Lines Producer license?

Correct Answer: B. Applicant must be competent, trustworthy and of good business reputation.

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Question 9: An Insurance Producer has died. Which statement applies?

Correct Answer: A. A Temporary Insurance Producer in Case of Death, Disability or Military Service license may be obtained by a surviving spouse without examination.

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Question 10: When must a Buyer's Guide be given to a prospect?

Correct Answer: B. When proposing new life insurance.

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Question 11: Which of the following is a requirement that applies after an examination has been made?

Correct Answer: B. If an Insurance Producer receives a report from the State Insurance Director alleging substantive violations of State Insurance Laws, he or she has 14 days to demand a hearing.

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Question 12: What is the penalty for rebating?

Correct Answer: B. Class B Misdemeanor.

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Question 13: What insurance companies must participate in the Guaranty Fund?

Correct Answer: D. All admitted insurance companies.

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Question 14: Which of the following is ALWAYS an Insurance Producer license requirement?

Correct Answer: A. $215 per two-year Illinois Insurance Department fee.

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Question 15: Which of the following describes altruism?

Correct Answer: D. Unselfishness.

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Question 16: When must money be deposited to a Premium Fund Trust Account?

Correct Answer: B. When holding monies 15 days or more.

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Question 17: Which of the following does NOT describe controlled business?

Correct Answer: C. All of the insurance a person sells is to cold prospects the producer does not know.

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Question 18: All of the following are requirements for an Insurance Producer license EXCEPT?

Correct Answer: A. At least age 21.

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Question 19: An insured has turned in his/her Whole Life policy and received back cash from the insurance company. Which of the following best describes this transaction?

Correct Answer: B. Surrender.

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Question 20: An Insurance Producer has been convicted of a felony crime. Which of the following statements apply?

Correct Answer: A. The Insurance Producer must report the felony conviction to the State Insurance Director.

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Question 21: In which of the following circumstances would an insurance company be required to report the circumstances concerning the termination of a producer's agency contract?

Correct Answer: D. The producer was caught misappropriating premium monies from customers.

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Question 22: Which of the following is NOT a penalty for violating an order issued by the State Insurance Director as a result of an examination or hearing?

Correct Answer: C. Up to 1 year in jail.

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Question 23: When is a Premium Finance Company license required?

Correct Answer: C. An Insurance Producer has allowed more than 10% of his/her accounts receivable to go over 90 days.

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Question 24: Which of the following is a Temporary Insurance Producer license requirement?

Correct Answer: C. The applicant must be in the process of fulfilling the Pre-License Education requirement.

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Question 25: Which of the following statements concerning the advertisement of life insurance dividends is true?

Correct Answer: A. It is illegal to state that a policy is a participating policy when, in fact, it is not.

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Question 26: Which of the following statements concerning the sale of Life insurance is true?

Correct Answer: A. An advertisement cannot mislead by stating that a policy will be offered only during a limited enrollment period when enrollment is not, in fact, limited.

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Question 27: Which of the following are NOT required to be licensed?

Correct Answer: A. Employers who administer their own employee benefit programs.

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Question 28: Which of the following does NOT have a fiduciary responsibility to the insurance company in handling premium monies?

Correct Answer: A. Insured.

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Question 29: A Premium Fund Trust Account may be maintained in any of the following types of accounts EXCEPT?

Correct Answer: D. A New York bank account.

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Question 30: What is the license fee for a Business Entity?

Correct Answer: A. $150 per two years.

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Question 31: What is the Insurance Producer Administrative fund?

Correct Answer: D. It is a fund that the State Department of Insurance maintains for license fees received.

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Question 32: Which of following statements apply to Non-Resident Insurance Producers?

Correct Answer: B. Their policies do not have to be countersigned by a resident Producer.

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Question 33: All of the following are considered to be forms of advertisements EXCEPT which?

Correct Answer: D. Approximate figures which a producer orally quotes to the insured.

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Question 34: All of the following are penalties that can be applied to misappropriation of premium money EXCEPT?

Correct Answer: C. 20 years prison.

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Question 35: They are not required to take the Illinois examination if their resident state requires examination of Illinois producers.

Correct Answer: C. A company owned by stockholders.

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Question 36: All of the following statements concerning the correlated sale of life insurance and mutual funds is true EXCEPT?

Correct Answer: C. Policy illustrations do not have to be filed with the Director of Insurance.

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Question 37: Which of the following is required to take an examination?

Correct Answer: C. Someone who was licensed in another state but terminated his/her license more than two years ago.

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Question 38: Which of the following is considered to be a replacement of life insurance?

Correct Answer: B. A policy is being surrendered and the Paid-Up Insurance Nonforfeiture Option is being exercised at the same time that a new policy is being purchased.

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Question 39: A Premium Fund Trust Account requires all of the following EXCEPT?

Correct Answer: C. Policyholder’s personal information.

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Question 40: When can an insurance company, Insurance Producer or Business Entity be financially examined by the State Department of Insurance?

Correct Answer: B. All insurance companies must submit annual financial statements to every State Department of Insurance where they are licensed.

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Question 41: What is a penalty for NOT being properly licensed as an insurance producer?

Correct Answer: D. Class A misdemeanor for selling one policy without a proper license.

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Question 42: Which of the following does NOT describe brokerage?

Correct Answer: C. Selling stocks, bonds and real estate in addition to insurance.

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Question 43: Commissions can be paid to whom?

Correct Answer: A. A licensed Insurance Producer who solicits or binds an insurance policy.

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Question 1: What is the penalty for NOT being properly licensed?

Correct Answer: A. Class A Misdemeanor for acting as an Insurance Producer without the proper license and misappropriating premium monies.

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Question 2: Which of the following statements about revocation of a producer license is true?

Correct Answer: A. At the end of the revocation period the producer automatically gets his or her license back.

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Question 3: The State Insurance Director has which of the following powers?

Correct Answer: A. Approve all premium rates.

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Question 4: Which of the following statements concerning termination of an Insurance Producer license is true?

Correct Answer: A. It can be revoked if the Continuing Education requirement is not satisfied

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Question 5: Which of the following statements concerning the required life insurance policy summary is true?

Correct Answer: A. It optionally may be given to the prospect at the time of policy delivery.

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Question 6: When must a change of address be reported?

Correct Answer: A. An Insurance Producer must report only a change of business address.

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Question 7: Which of the following statements describes a Premium Fund Trust Account?

Correct Answer: A. Its purpose is to keep monies being held for insurance companies separate from personal or business monies.

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Question 8: All of the following statements concerning licensing are true EXCEPT?

Correct Answer: A. A Temporary Insurance Producer license in Case of Death, Disability or Military Service is issued for a period of 180 days and may be renewed for an additional term.

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Question 9: Which of the following must be done when selling mutual funds along with life insurance as a package sale?

Correct Answer: A. The prospect must be advised that he must buy life insurance in order to purchase the mutual fund.

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Question 10: Which of the following is owned by its policyholders?

Correct Answer: A. Stock companies.

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Question 11: Which of the following describes a Temporary Insurance Producer license?

Correct Answer: A. A person can obtain no more than two per year.

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Question 12: Which of the following is an example of an illegal rebate?

Correct Answer: A. Taking a client out to lunch so that you will have an opportunity to make a sales presentation.

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Question 13: Which is the penalty for an insurance company NOT giving the State Insurance Director proper notice of termination of a producer’s license when required?

Correct Answer: A. Class A Misdemeanor.

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Question 1: All of the following are penalties that could apply for failure to properly maintain a Premium Fund Trust Account EXCEPT which?

Correct Answer: D. Class X Felony.

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Question 2: Which of the following statements concerning Medicare Supplement insurance is NOT true?

Correct Answer: A. Private Medicare Supplement insurance policies do NOT require state Department of Insurance approval.

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Question 3: When selling a new life insurance policy, which of the following must be done?

Correct Answer: C. Any statistics used must be presented fairly.

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Question 4: How long must insurance companies maintain files of life insurance advertising materials?

Correct Answer: D. 4 years.

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Question 5: Mr. R. Bear, an Insurance Producer, has been caught giving a rebate to a client, Ms. E. Caitlin. All of the following penalties apply EXCEPT?

Correct Answer: C. Penalties can be assessed only to the insurance producer, not to the customer.

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Question 6: Which of the following does NOT have a fiduciary responsibility to the insurance company in handling premium monies?

Correct Answer: A. Insured.

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Question 7: All of the following describe controlled business EXCEPT?

Correct Answer: C. All of the insurance a person sells is to customers other than family, employees or a personally owned business.

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Question 8: Which of the following describe a Temporary Insurance Producer license?

Correct Answer: C. It allows an individual new to insurance sales to go out, start making sales and start earning commissions prior to having passed the written examination.

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Question 9: When can an insurance company, Insurance Producer or Business Entity be financially examined by the State Department of Insurance?

Correct Answer: B. All insurance companies must submit annual financial statements to every State Department of Insurance where they are licensed.

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Question 10: Which of the following constitutes misappropriation of premium money?

Correct Answer: D. Failing to keep proper records on premium monies.

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Question 11: Mr. Ryan James is an insurance company underwriter who is NOT involved in solicitation or negotiation of policies. Which of the following applies?

Correct Answer: A. He is not required to be licensed.

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Question 12: What is a life insurance policy surrender?

Correct Answer: D. It is when you turn in a policy and get cash back.

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Question 13: Who would qualify for an Illinois Non-Resident producer license?

Correct Answer: C. An individual who resides in Kentucky and is licensed as an insurance producer in Kentucky who wants to sell insurance in Illinois.

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Question 14: When must a change of address be reported?

Correct Answer: B. A change of address must be reported within 30 days.

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Question 15: Which of the following describes altruism?

Correct Answer: D. Unselfishness.

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Question 16: In which of the following circumstances would an insurance company be required to report the circumstances concerning the termination of a producer's agency contract?

Correct Answer: D. The producer was caught misappropriating premium monies from customers.

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Question 17: What is the Insurance Producer Administrative fund?

Correct Answer: D. It is a fund that the State Department of Insurance maintains for license fees received.

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Question 18: Which of the following is NOT a procedure which must be followed by the state Insurance Director when suspending or revoking a producer license?

Correct Answer: C. If a hearing is requested, the Insurance Director must give the insurance producer at least 45 days written notice of the hearing.

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Question 19: Which of the following describes a stock insurance company?

Correct Answer: C. A company owned by stockholders.

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Question 20: Which of the following is a Limited Lines Producer license requirement?

Correct Answer: B. The person must be trustworthy, competent and of good business reputation.

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Question 21: Which of the following must participate in the Illinois Insurance Guaranty Fund?

Correct Answer: D. All Illinois admitted companies.

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Question 22: Which of the following is NOT an Insurance Producer education requirement?

Correct Answer: A. 25 hours of Pre-License Education.

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Question 23: Which of the following is NOT an Insurance Producer license qualification?

Correct Answer: D. The producer must sell only controlled business.

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Question 24: Which of the following describes brokering?

Correct Answer: A. An Insurance Producer arranges coverage for a client through an insurance company with which the producer does not have an agency contract.

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Question 25: Which of the following is NOT a quality needed to qualify as a professional?

Correct Answer: D. High income.

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Question 26: The State Insurance Director has decided to examine an Insurance Producer. All of the following are procedures that must be followed EXCEPT?

Correct Answer: C. If the state Department of Insurance examiner writes a report to the Director a copy does not have to be sent to the person examined.

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Question 27: Which of the following must be disclosed in an Accident and Health insurance policy advertisement?

Correct Answer: A. Whether the insurance company can refuse to renew, cancel or terminate the policy.

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Question 28: An Insurance Producer has been convicted of a felony crime. Which of the following statements apply?

Correct Answer: A. The Insurance Producer must report the felony conviction to the State Insurance Director.

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Question 29: To whom may a Temporary Insurance Producer in Case of Death, Disability or Military Service license be issued?

Correct Answer: D. The widow of a deceased Insurance Producer who has never taken the state examinations.

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Question 30: Which of the following is NOT considered to be a replacement of life insurance?

Correct Answer: C. The insured is converting a Term plan to a Whole Life plan.

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Question 31: All of the following are considered to be a form of advertisement by the Advertising of Accident and Sickness Insurance Regulation EXCEPT?

Correct Answer: C. Rebating.

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Question 32: Which is the penalty for an insurance company NOT giving the State Insurance Director proper notice of termination of a license when required?

Correct Answer: B. Civil penalty to the insurance company of up to $1000 per violation.

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Question 33: What is a "Buyer's Guide"?

Correct Answer: B. State Department of Insurance rules state verbatim what this booklet must state, telling consumers how to compare policies and previous rates.

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Question 34: To whom may commissions NOT be paid?

Correct Answer: A. An employee of a Business Entity who did not hold a license for the class of insurance at the time the policy was sold.

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Question 35: To whom does a producer owe a fiduciary responsibility?

Correct Answer: B. The insurance company.

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Question 36: Which of the following is a requirement of the Advertising of Accident and Sickness Insurance regulation?

Correct Answer: D. Special awards such a "safe drivers' award" cannot be used in connection with accident and health policies.

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Question 37: Which of the following statements concerning the advertisement of Accident and Health insurance is NOT true?

Correct Answer: C. If the person who is making a testimonial is being paid or has a financial interest in the insurance company it does NOT have to be disclosed.

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Question 38: Which of the following does NOT describe brokerage?

Correct Answer: C. Selling stocks, bonds and real estate in addition to insurance.

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Question 39: The State Minimum Standards rule does which of the following?

Correct Answer: D. Details policy provisions which all individual Accident/Health policies must include.

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Question 40: Which of the following are NOT required to be licensed?

Correct Answer: A. Employers who administer their own employee benefit programs.

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Question 41: Who applies for a Business Entity license?

Correct Answer: B. An authorized member.

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Question 42: A Premium Fund Trust Account DOES NOT require which of the following records?

Correct Answer: C. Petty cash disbursements.

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Question 43: Which of the following is considered to be a replacement of life insurance?

Correct Answer: B. A policy is being surrendered and the Paid-Up Insurance Nonforfeiture Option is being exercised at the same time that a new policy is being purchased.

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Question 44: Which of the following statements concerning an Insurance Producer license is true?

Correct Answer: C. It is issued to the individual's resident address.

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Question 45: Which of the following acts does NOT require an Insurance Producer license?

Correct Answer: B. Being a Public Adjuster.

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Question 46: According to the state Insurance regulations, an insurance company can contest a health insurance claim only due to fraud after the policy has been in effect how long?

Correct Answer: B. 2 years.

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Question 47: All of the following are considered to be forms of advertisements EXCEPT which?

Correct Answer: D. Approximate figures which a producer orally quotes to the insured.

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Question 48: What is the title of the state official primarily in charge of regulating insurance companies, Insurance Producers and Registered Firms?

Correct Answer: A. Director of Insurance.

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Question 49: A Premium Fund Trust Account can be maintained in which of the following types of accounts?

Correct Answer: B. An Illinois bank account.

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Question 50: What is the fee for a Temporary Insurance Producer license?

Correct Answer: D. $ 50 one time.

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Question 1: When selling a new life insurance policy, which of the following must be done?

Correct Answer: C. Any statistics used must be presented fairly.

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Question 2: Which of the following is NOT a quality needed to qualify as a professional?

Correct Answer: D. High income.

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Question 3: To whom may a Temporary Insurance Producer in Case of Death, Disability or Military Service license be issued?

Correct Answer: D. The widow of a deceased Insurance Producer who has never taken the state examinations.

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Question 4: When must a Premium Fund Trust Account be maintained?

Correct Answer: C. Whenever a producer is going to hold monies for 15 days.

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Question 5: According to the Advertising and Sales Promotion of Life Insurance regulation, which of the following is NOT a form of advertisement?

Correct Answer: C. General oral statements made by a producer concerning the value of a policy.

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Question 6: What is a mutual fund program?

Correct Answer: D. A program where a large number of investors contribute money to a fund which is used to make large-scale investments at high yields.

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Question 7: Which of the following must be disclosed in an Accident/Health insurance advertisement?

Correct Answer: A. The name of the insurance company.

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Question 8: Ms. J. Jordan, an Insurance Producer, has been caught violating the controlled business requirement. Which of the statements is true?

Correct Answer: C. That means she did not sell as much insurance to others as what she sold to herself, her spouse, her own business or her employer.

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Question 9: What is the license fee for a Business Entity?

Correct Answer: A. $ 150 per two years.

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Question 10: Which of the following statements concerning the Department of Insurance Advertisement of Accident and Sickness Insurance regulation is NOT true?

Correct Answer: C. It can be stated the insured may profit from being disabled.

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Question 11: Which is a penalty for acting as an Insurance Producer without a proper license?

Correct Answer: A. Class A Misdemeanor.

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Question 12: What is the title of the state official primarily in charge of regulating insurance companies, Insurance Producers and Business Entities?

Correct Answer: A. Director of Insurance.

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Question 13: Which of the following is a license requirement?

Correct Answer: D. Application from the individual applicant.

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Question 14: Which of the following is an objective of the Illinois Insurance Guaranty Fund?

Correct Answer: A. Prevent insureds from losing benefits when insurance companies become insolvent.

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Question 15: Which of the following acts does NOT require an Insurance Producer license?

Correct Answer: B. Being a Public Adjuster.

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Question 16: Who has a fiduciary responsibility to the insurance company in handling premium monies?

Correct Answer: D. A Business Entity who has submitted an insurance application to an insurance company which the insurance company accepted.

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Question 17: What is a "Buyer's Guide"?

Correct Answer: B. State Department of Insurance rules state verbatim what this booklet must state, telling consumers how to compare policies and premium rates.

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Question 18: Which of the following is not a record required by a Premium Fund Trust Account?

Correct Answer: D. Paid invoices for office expenses.

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Question 19: Which of the following statements DOES NOT describe controlled business?

Correct Answer: C. A producer sells insurance on the life of a friend.

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Question 20: When is an insurance company considered to have a qualified training program?

Correct Answer: A. When at least 50% of its Temporary Insurance Producers obtain Insurance Producer licenses prior to the expiration of their Temporary Insurance Producer licenses.

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Question 21: Which of the following was originally chartered in the state in which it is doing business?

Correct Answer: A. Domestic companies.

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Question 22: Which of the following statements concerning life insurance advertisements and sales presentations is true?

Correct Answer: C. If testimonials are used, they must be genuine, represent the current opinion of the author and be applicable to the policy being advertised.

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Question 23: Which of the following have to be licensed as an insurance producer?

Correct Answer: C. People who quote rates and negotiate coverages.

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Question 24: Which of the following must be disclosed in an Accident and Health insurance policy advertisement?

Correct Answer: A. Whether the insurance company can refuse to renew, cancel or terminate the policy.

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Question 25: Which of the following is NOT a procedure which must be followed by the State Insurance Director when suspending or revoking a producer license?

Correct Answer: C. If a hearing is requested, it can be held anywhere in the state of Illinois.

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Question 26: The State Minimum Standards rule applies to what type of policies?

Correct Answer: B. All individual Health insurance policies.

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Question 27: Which of the following statements concerning an Insurance Producer license is true?

Correct Answer: A. A person with an Insurance Producer license can sell for only one insurance company.

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Question 28: Which of the following statements concerning an Insurance Producer license is true?

Correct Answer: C. It is issued to the individual's resident address.

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Question 29: Which of the following describes a Limited Lines Producer?

Correct Answer: D. An individual who can sell only certain limited types of insurance.

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Question 30: Which of the following is NOT considered to be a replacement of life insurance?

Correct Answer: C. The prospect is terminating a nonrenewable, nonconvertible term plan with 2 years left to expiration while buying a new policy.

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Question 31: What is a conversion of a life insurance policy?

Correct Answer: B. It is when you exercise a conversion provision within a policy to convert to a policy of a different type within the same insurance company.

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Question 32: To sell insurance, which of the following must have a license, but does NOT have to take a written examination?

Correct Answer: D. Limited Lines Producers.

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Question 33: Which of the following statements describes a Business Entity?

Correct Answer: B. It is an organization that sells and services insurance.

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Question 34: An insurance company terminated a producer's agency contract because the producer was caught misappropriating premium monies. The insurance company failed to report this to the State Insurance Director. What penalties may apply?

Correct Answer: B. A civil penalty to the insurance company.

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Question 35: According to the state Insurance regulations, an insurance company can contest a health insurance claim only due to fraud after the policy has been in effect how long?

Correct Answer: B. 2 years.

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Question 36: Mr. Rangey O'Ryan has a $25,000 Whole Life Insurance policy which he bought last year which has NOT yet accrued any cash value. Mr. O'Ryan is considering surrendering that old policy in order to purchase a $100,000 Term policy. Which is NOT a requirement of the Insurance Producer selling the new policy?

Correct Answer: C. Avoid selling the new policy in as much as it would be a replacement policy.

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Question 37: In which situations must an Insurance Producer be disclosed in a policy?

Correct Answer: A. All policies.

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Question 38: Who would qualify for an Illinois Non-Resident producer license?

Correct Answer: C. An individual who resides in Kentucky and is licensed as an insurance producer in Kentucky who wants to sell insurance in Illinois.

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Question 39: When can commissions be paid to a person who is NOT currently licensed?

Correct Answer: B. If the person was properly licensed at the time the policy was sold.

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Question 40: Mr. S. Jordan, an Insurance Producer, has been caught making an intentional, material misstatement on an application for his Insurance Producer license. Which of the following penalties does NOT apply?

Correct Answer: A. Up to one year in jail.

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Question 41: All of the following statements concerning the sale of Medicare Supplement insurance are true EXCEPT?

Correct Answer: C. The Insurance Producer does not have a responsibility to determine the appropriateness of the policy in light of the applicant's other coverages.

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Question 42: Which of the following can be considered to be pre-existing conditions under the State Department of Insurance rules?

Correct Answer: A. Something that occurred before the inception date of the policy and continued to manifest itself up to the inception of the policy.

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Question 43: A Premium Fund Trust Account can be maintained in which of the following types of accounts?

Correct Answer: B. An Illinois bank account.

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Question 44: Which of the following is NOT an Unfair Method of Competition for which a person can be fined a maximum civil penalty of $5000?

Correct Answer: A. Misappropriating premium moneys.

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Question 45: Mr. R. Bear, an Insurance Producer, has been caught giving a rebate to a client, Ms. E. Caitlin. Which of the following penalties does NOT apply?

Correct Answer: C. Mr. R. Bear can be fined up to $5000 and/or be sentenced to 5 years in prison.

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Question 46: Which of the following is NOT an Insurance Producer license qualification?

Correct Answer: D. The producer must sell only controlled business.

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Question 47: Which of the following is a Limited Lines Producer license requirement?

Correct Answer: B. The person must be trustworthy, competent and of good business reputation.

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Question 48: How often can the State Insurance Director financially examine an Insurance Producer?

Correct Answer: D. At random.

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Question 49: Which of the following is a penalty for an Unfair Method of Competition such as overstating the financial status of an insurance company?

Correct Answer: C. Fine of not less than $100, but not more than $5000.

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Question 50: What is the fee for a Temporary Insurance Producer license?

Correct Answer: D. $ 50 one time.

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